Competition and Regulation in the Indonesian Telecom Environment

1
Competition and Regulation in the Indonesian
Telecom Environment

• Dr.M. Suwarso
• Jakarta, Indonesia

2
Agenda

• Global pattern of the roadmap toward full
  competition
• The roadmap in the Indonesian context
• Challenges and issues along the route
• The way ahead
• Concluding remarks

3
Evolving stage of competition
Transitional phase
Monopoly
Full competition
Global Pattern of Roadmap Toward Competition

• full competition in fixed service
• new entrants licensed for fixed service
• competition between Telkom, Indosat and new
  entrants
• exclusivity no longer exists in whatever service

• original termination date of monopoly right
  shifted to earlier date
• duopoly starts after (new) date of monopoly
  rights termination
• duopoly of equals between Telkom and Indosat in
  local, STD and IDD

• Telkom sole domestic service provider,
• Indosat sole international service provider
• both granted finite exclusivity rights at IPO

Indonesian Licensing Scenario
4
Liberation schedule for fixed service
Shortened exclusivity period
Original exclusivity period
Local service
2010
2002
2005
STD service
2003
IDD service
2004
2003
2010
1995
1996
2005
2000
1999
5
Issues and challenges along the road

• Requirement to restructure shareholdings
• joint shareholdings between competitive companies
  has to be eliminated
• complex legal process to eliminate joint
  shareholdings between public companies
• Required compensation for early termination of
  monopoly
• process to asses compensation
• bureaucratic intricacy to carry out payment
• Rate rebalancing
• Rate hike of local service became apolitical
  issue
• Parliament demanded several time postponments

6
The away ahead

• Asymmetric regulation to level the playing field
• Telkom designated as dominant operator in local
  and STD services
• Indosat designated as dominant market operator
  in IDD services
• Extra requirements to dominant operators
• no cross subsidy from dominant service to
  competitive service
• accounting separation requirement
• strongly enforcing ban against slamming and
  cracking

7
Conclusion

• detailed plan is needed for the transition from
  monopoly to competition
• historical privileges of incumbents makes market
  opening by itself insufficient
• rate rebalancing has to be completed ahead of
  competition

8

• Thank You So Much!