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National Regulatory Authority (NRA) Case Study Indonesia
Taungoo, 1st October 2013
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Koesmarihati Sugondo [email protected]
Regulatory Training Course, Taungoo, 01 October 2013
This work was carried out with the aid of a grant from the International Development Research Centre, Canada and UKaid from the Department for International Development, UK.
National Regulatory Authority (NRA) Case Study Indonesia
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Background (1)
There has been paradigm shift in telecommunications:
Old Paradigm New Paradigm
As public Utility As commodity
Monopolistic Market Competitive Market
Basic and non-Basic Network and Services
Separate Network Convergence
Analog/Digital Digital
Circuit Switched Towards IP
Dominated Wire line Wireless Line
Distance Sensitive Distance Incensitive
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Background (2)
In 2003, lowest telecommunications density in the region
– Telephone density of fixed line is about 4% and mobile is 8,5% ,
– 39% districts capital and 64% villages has not got telecommunications facilities
– Internet users is still under 8%
• Since 1996, telecommunications development is no longer receive state budget ;
• Indonesia Commitment globally : WTO and APEC
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Background (3)
SIGNIFICANT EVENT IN THE TELECOM REGULATION AND INDUSRY,
Law No 36 year 1999, giving signal that telecommunications is entering the full multi-operator market;
Cellular mobile and Internet which are already competitive business shows remarkable growth;
Early termination of exclusivity right for PT TELKOM for domestic fixed local and long distance and exclusivity right for PT INDOSAT for international ; Local exclusivity right from originally Dec. 2010 to August 2002; Long distance exclusivity right from Dec. 2005 to August 2003*; International exclusivity right from Dec 2004 to August 2003* ;
*Note: In actual it was implemented in 2004
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Background (4)
Consumers require choice of operators with variety of services with good quality and reasonable price
NEED REGULATORY BODY WHICH IS TRANSPARANT, INDEPENDENT AND IMPARTIAL TO ALL OPERATORS to GIVE HEALTHY COMPETITION.
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REGULATORY BODY
• Stated in the Law No. 36/1999, article 4 (explanation)
– The Telecommunications Minister could delegate regulation function to a Regulatory Body
• Ministerial decree no 31 year of 2003
– Establishment of Badan Regulasi Telekomunikasi Indonesia
(BRTI) – Indonesian Telecommunications Regulatory Body;
– To secure transparency, independency and fairness in telecommunication Network and Service operations;
– Effective from 5 January 2004;
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Organization Structure (1)
– BRTI consists of Telecommunications Regulatory Committee Members (of five) and Directorate General Posts and Telecommunications
– The Committee members consists of a chairman which is Director General of Posts and Telecommunications and 4 experts in technical (telecommunications & IT) , legal, economics and social.
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Organization Structure (2)
– The 4 experts members were selected through independent selection team;
– The Committee Members are elected for two years term, which can be extended one more term if necessary
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Decisions
The decision of BRTI is implemented by the Committee members collegially. In case no consensus reached, voting is taken by the Committee members with equal voting right In carrying out its task, Committee members is independent from power/influence of other interest.
Each Committee decision has to : go through process considering input in the form of opinion and thought which developed within the community ; To secure transparancy, independency and fairness.
– The BRTI’s decisions are in the form of Ministerial or DG decree.
– BRTI reports to Minister responsible for Telecommunications.
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Working Mechanism
Problems listing - Rebalancing Tariff - Competition Safeguard - Operation Performance Standard - Quality Service Standard - Interconnection - Tools Standardization - Spectrum allocation - USO - International Standardization - Etc.
Method
- Data collection - Dialog - Feedback - Benchmarking - Public Consultation - Sozialisation
Product: - Regulation - Rules of The Game - Signed by Ministry/ Director General of Post & Telecommunication
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• Weakness – The existing BRTI do not have strong legal based;
– BRTI is funded from State Budget which is part of DGPT’s budget, caused bureaucracy and less independency;
– The Chairman of BRTI is the Director General of Posts and Telecommunications, and BRTI consists of DGPT and Committees. Giving confusion on when as part of the Regulator (BRTI) or when is part of the Ministry.
– Often decisions is still waiting for signature from the Minister.
Weakness & Strength of
Indonesian Regulatory Body (1)
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• Strength Four of five Committee Members were selected from various field of
expertise and sources (public, private, academics and practitioners)
Decision is made collegially among the five members
Do not have to work from a scratch, BRTI can collect the work already initiated by DG POSTEL
A start for ideal Independent Regulatory Body (IRB).
Even in Asia Pacific, not all countries have an IRB. There is no rules how is IRB should be structured
Weakness and Strength of
Indonesian Regulatory Body (2)
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Our several Achievement …..
• Through many struggle through our bureaucracy , echo sectorial as well as the resistance of our incumbents ,
• We do not claimed that it is only because of us,
• Which we learned and understand that this challenges is not happened only in Indonesia, we achieved the followings:
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Tariff Rebalancing
• Tariff rebalancing between the local and long distance,
• It was easy to say to public that the long distance decreased but is is very hard to convinced that local tariff is going up .
• As the Law no 36 year 1999 on the telecommunications stated that the tariff based on cost and the Government give the formula, and Operators themselves decided the tariff.
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Interconnection (1)
• After a long journey, all network Operators agreed with the Government rules;
• Interconnection should be based on cost;
• Operators make agreement that the independent international Consultant which work with local consultant will do the calculation with all representatives from all network operators as counterparts;
• It was decided using Long Range Incremental Cost (LRIC) using bottom up approached.
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Interconnection (2)
The Cost Based Interconnect consists of Originating, Terminating and Transits;
Calculation using 2005 data , networks from major Operators and element cost from the lowest network Operators;
Completed in 2006 with all regulation put in Ministerial Decree no 6 year 2008, which consists of main body and 5 Annexes : formula to calculate interconnection cost ; Cost allocation and Guidance to make Financial Report to Regulator Guidance to make RIO ; Essential Facilities, Dispute Settlement
The Cost Based Interconnection implemented start from 1 January 2007
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Interconnection (3)
• We received many comments, that the interconnect price was too high, but for a start a transparent and non discriminative regulation is implemented for interconnection.
• Within that year the traffic was rocketed , and we feel we have to do re-calculation using more recent network data and cost.
• In 2008, we announced the new interconnection formula which decreasing the cost by between 30-40 %
• Operators reacted by decreasing the tariff.
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Spectrum Fee
Before 2006
• Allocation by First come first Serve , then Beauty Contest – Less transparent
– Do not reflect the scarcity of the frequency Spectrum
– Do not encourage efficiency
• Spectrum fee based on Pay as Use ( BTS and Power consumption)
After 2006 • Allocation by Auction
– Transparent – Assigned only for the company
which value the most ( market based) - Encourage Efficiency
• Spectrum Fee based on the width of the band allocated : – Encourage the most optimal us
of radio frequency – Reduce administrative coat – Predictable for the purpose of
the budgeting process
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Leased Line reform
• Leased line is an essential facilities • Previously there is no cost based regulation applied • The Incumbent PT Telkom is the major operator control
the market and tariff of the leased line is high , compare with other countries
• Many Operators rather build themselves than buy from PT Telkom,
• Price of Leased Line stay high and occupancy of network is low - inefficient network and investment
• In 2006, Government issued new regulation for the leased line and major operator has to issue and get approval of their Leased line Price Offer
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Indonesian ICT Status 2004 -2009 (1/2) CI
Availability
Infrastructure Rollout
Density
International Backbone
Domestic Backbone
Access
1 provider 2 optic fiber route
6 provider 9 optic fiber route
1 provider Coverage : Java
5 provider Coverage : Java,
Sumatera, Kalimantan, Sulawesi
PSTN, AMPS, GSM PSTN, GSM, CDMA, 3G,
ADSL, BWA
USO
PSO
43000 blank spot from 72000 villages
Tele density : 18%
7000 blank spot from 82000 villages
Tele density : 75%
2341 PSO 2350 PSO
Affordability
Telco industry
Interconnection Leased line
Additional Infrastructure
License without commitment
License with commitment and
penalty
US 18 cent / minutes Source : Deutsche bank
US 1.8 cent / minutes Source : Deutsche bank
Internet : IDR 9.000 / hour
Internet : IDR 15.000 / week
Competition
Tariff policy
3G, BWA, FWA, ADSL
2004 2009
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Indonesian ICT Status 2004 - 2009 (2/2) MCI
Tariff Situation :
Quality
Quality of Service
Penalty policy
Not available 5 regulation for local, long distance,
international call, , cellular and FWA services
Not available Government Act 7 Year 2009
2004 2009
Security
Policy
Facility
Security on Telco Network
(Gov Reg 52 Year 2000)
Security on Internet Infrastructure (Ministry Regulation26 Year 2007)
Cyberlaw (Electronic &Internet Transaction Act)
Not available ID-SIRTII as (Indonesia National CSIRT/CC)
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2004 2005 2006 2007 2008 2009 2010 (Q-2)
Cellular 30,336,607 46,992,118 63,803,015 93,386,881 140,578,243 163,676,961 178,778,531
Fix Wireless Access 1,673,081 4,683,363 6,014,031 10,811,635 21,703,843 26,385,654 27,319,069
PSTN 8,703,218 8,824,467 8,806,702 8,717,872 8,674,228 8,423,973 8,429,180
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
Sub
scri
be
r
Fixed and Mobile Telephone Subscriber
Fixed and Mobile Telephony
Cellular
Fixed Wireless Access
PSTN
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Internet
2004 2005 2006 2007 2008 2009
Internet Service Provider 28 48 84 114 165 178
Network Access Provider 2 10 17 22 36 39
Mobile Internet Subscriber 656,578 1,110,945 1,429,121 3,137,634 5,538,262 14,059,137
Fix Internet Subscriber 689,746 742,049 884,320 1,594,385 1,745,235 1,937,942
0
20
40
60
80
100
120
140
160
180
200
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
Inte
rnet
Su
bsc
rib
er
ISP NAP
Fix Internet
Mobile Internet
Internet Subscribers
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2004 2005 2006 2007 2008 2009 2010 2011 2012
Cellular 30,336,607 46,992,118 63,803,015 93,386,881 140,578,242 163,676,961 211,145,429 247,923,000 283,492,000
FWA 1,673,081 4,683,363 6,014,031 10,811,635 21,703,843 26,383,654 31,773,988 29,102,306 29,707,001
PSTN 8,703,218 8,824,467 8,806,702 8,717,872 8,674,228 8,423,973 8,400,000 8,400,000 8,400,000
Internet 11,200,000 16,000,000 20,000,000 20,000,000 25,000,000 30,000,000 42,000,000 55,000,000 63,000,000
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000 Su
bsc
rib
er
Cellular
Internet
FWA
PSTN