PTC 3rd

Annual Report on

Broadband

Indonesia:

Connecting Diversity

Available April 2015

at www.ptc.org

USC.marshallElizabeth Fife, Ph.D. Editor

Urban

Rural

Entire

3G

• 3G subscription has room for growth

• Much opportunity for Broadband Growth

• Solid economic outlook will support industry growth

Indonesia’s Economic and Strategic Importance

Geography, dramatic economic growth and sheer size of market

Tech-savvy youthful market and rapidly

growing middle class (Consulting companies

estimate rapid economic growth, largest market for tablets in SE Asia)

Planned network investment (Telkom to spend $3.7 billion on broadband in 2015)

Indonesia’s Telecom Challenges

Economic and Spatial Access Inequality but future revenues dependent on mobile data

service revenues

Increasing Mobile Use and Decreasing Revenue

Dominance of Mobile – Prepaid Market

Lack of Fixed Broadband Infrastructure

Digital Divide is a Spatial Divide

Unique aspects of Indonesia…

• ICT-related benefits have not widely diffused into economy or society in Indonesia

• Income not always determining factor in ICT access - geography matters

• Geographical disparities should be recognized as factor affecting unequal distribution

of ICT benefits

Source: Rohman and Bohlin (2011)

Unlocking Telecom Opportunities

Further industry development

requires substantial

network investment

cellular subscriptions dwarf fixed-line and fixed-

wireless subscriptions

Mostly 2G now – leap to 4G will require significant

equipment investment

Potential for 3G and LTE: operators unsure about

demand

Remote areas – lack

access

What do Indonesian customers do on their mobile

phones?

87.2%

96.6%

75%

77.6%

70%

57.6%

65%

62.6%

Emerging Economy Challenges

Transparency

Institutional capacity

Weak regulatory

environment

Need for skilled labor

force

Poor infrastructure

Difficult geography

Agricultural Reform & Education: keys to

Indonesia’s national information society

100%

71%

100%

87.7%

83.3%

96%

83.3%

81%

Expectations for investment in Indonesia’s mobile

networks in rural areas in the next 2-3 years

37.5% 37.5%

25%

Broadband Drivers to Meet Needs

Societal Institutional

Economic Technological

innovation and buy-in

ICT training and education to

support usage

Societal Drivers

Institutional Drivers

Strengthening independent telecom/ICT regulators so stakeholders can be organized and plans implemented

Developing processes with transparency at all stages and levels

Developing mechanisms to effectively implement and coordinate master plans

Readiness factors for Indonesia - and other

emerging markets

Investing in Network

Government’s role is

foundational

• Support for rural network investment

• Create stable enforcement of policy and laws

• Transparency

• Execution of legislation

New ideas are needed for network

infrastructure to grow

Economic Drivers

Rising incomes but unequal development

Developing lead applications: sectors likely to facilitate growth of

broadband: e.g. government, education, health

Core activities needed to increase investment

in Indonesia’s broadband

91.7%

96%

96%

91.7%

96%

96%

91.7%

Technological Drivers

Company Profile: Biznet

Unique among Indonesia’s

service providers in the

range of services offered and innovative

models intended to

reach a broad range of users

Focus on meeting and encouraging demand in areas of Indonesia that the large operators have not addressed

• pass 200,000 homes with cable TV, they have over 350 wi-fi spots

• laid more than 11,000 km of fiber optic cable

• international points of presence in major global cities including London, Seoul, and Hong Kong

High expectation for rapid growth of broadband

network infrastructure in next 2-3 years

25%

62.5%

12.5%

Facilitation of convergence between fixed and cellular

networks

Training, other support

Consulting

E-commerce and Mobile Payment

systems

Integrating cellular and online services

Mobile system security

Data centers

Unlocking Telecom Opportunities

(In-country Interviews)

Positive economic outlook: 5% CAGR 2010-18

Sources: The Economist Intelligence Unit & with permission from Ericsson Consumer Labs to use data charts)

3.0

5.6

5.45.7

6.4

3.1

6.8

4.2

7.4

2.5

5.8

0 2 4 6 8

Bubble size = GDP 2014 in USD

In P

erce

nta

ge

GDP Growth 2014

Australia

Bangladesh

Indonesia

Malaysia

Myanmar

New Zealand

Philippines

Singapore

Sri Lanka

Thailand

Vietnam

*Based on local country currency

Australia, $1,487 B

Bangladesh, $153 B

Myanmar, $47 B

Sri Lanka, $74 B

Singapore, $324 B

Malaysia, $333 B

New Zealand, $181 B

Philippines, $293 B

Thailand, $397 B

Vietnam, $187 B

Indonesia, $861

B

Wrap-up

• mobile services - low quality

with uneven coverage outside

urban areas, low capacity in

highly populated areas

• potential for developing

sector (higher speeds,

data services) if

infrastructure is in place

• continued economic

growth is necessary for

telecom investment to

progress

• connectivity to a network that

will support advanced

services is fundamental key to

growth

• spatial divide as well as economic divide - highest

levels of Internet penetration in western islands, in

east limited access to fixed broadband due to poor

backbone infrastructure

PTC BBR3: 8 Parts

Co

nn

ecti

ng

Div

ers

ity • current

snapshot of Indonesia’s telecom market

• Mobile broadband overview

• Indonesia’s last mile challenge

Ind

on

es

ia’s

Po

ten

tia

l: p

reva

ilin

g

res

ea

rch

on

th

e t

ele

co

m m

ark

et

an

d

ec

on

om

ic d

eve

lop

me

nt • Review of

academic sources

• Overview of industry and consultancy studies

Ind

ustr

y L

an

dscap

e • Indonesia’s telecom industry: competition and consolidation

• Major mobile players: profiles and current activities

• Tower business

• InternationalgGateways: submarine cable development

• Indonesia’s IT industry: data centers, cloud and M2M

Ind

on

esia

’s P

olicy a

nd

R

eg

ula

tory

Dyn

am

ics • Indonesian

Broadband Plan

• Palapa Ring Project

• Spectrum Availability and allocations

• outdated and minimal existing infrastructure, physical infrastructure (roads, electrical power)

PTC BBR3: 8 Parts

Pro

sp

ec

ts f

or

En

ab

lin

g In

do

ne

sia

’s

Mo

bile

an

d B

roa

db

an

d G

row

th

• Broadband Technology Choices for Indonesia’s archipelago

• Economy: diversification and momentum

• Societal Challenges: the skills gap

• Political Challenges: reform and stability

• Wrap-up: Social, Economic, Technology and Political Forces and Industry Growth

Th

e B

us

ine

ss

Cas

e f

or

Ind

on

esia • Increasing ARPU

in the Consumer Market

• Services and sectors that can support network sustainability

• Growth Sectors and Services

De

fin

ing

Dem

an

d:

Ex

pert

Su

rvey

Fin

din

gs • Indonesia’s

mobile consumer: summary of current survey data

• Customer profiles and addressable markets

Co

nclu

sio

n

Interviews (Academia)

• Broer, Rizal, Bandung, Institut Teknologi Bandung, University of Bandung

• Danar, Wikan, Professor, ITB, Institut Teknologi Bandung

• Hendradjaya, Bayu, Data and Software Engineering Research Division, School

of Electrical Engineering and Informatics, Institut Teknologi Bandung

• Irawan, Yoke Saadia, Anatomy and Physiology, eLearning, Telemedicine,

Biomedical Engineering, School of Electrical Engineering and Informatics,

Institut Teknologi Bandung

• Mengko, Tati, Head of Biomedical Engineering, Research Division, School of

Electrical Engineering & Informatics

• Setiawan, Agung, Medical Image Processing, Research Division on Biomedical

Engineering, School of Electrical Engineering and Informatics, Institut

Teknologi Bandung

Interviews (Industry)

• Hassan, Wan Faizal, XL Axiata

• Baasir, O. Marwan, Head of Regulatory & Government Relations, XL Axiata

• Chapelard, Frederic, Leader, Wireless Transmission, Global Business

Management, Trustee, Alcatel-Lucent Foundation, Alcatel-Lucent

• Higgins, Michael, President, Managing Director, Alcatel-Lucent Singapore

• Houlahan, Anthony, Head of Strategy, Southeast Asia and Oceania, Ericsson

• Aidi, Laili, Strategy Manager, Southeast Asia, Asia and Oceania, Ericsson

• Kusma, Adi, President, Director, Biznet

• Tellum, Brian, Cornerstone Capital Partners

• Yan, Jeffrey, Director of Technology Policy, Asia, Microsoft

Interviews (Governments and NGOs)

• Maeda, Kyotaro, First Secretary, Telecommunication and ICT Attache,

Embassy of Japan in Indonesia

• Tayyiba, Mira, Deputy Director for Post, Telecommunication and IT, Ministry of

National Development Planning/National Development Planning Agency

(Bappenas)

• Setiawan, Denny, Head of Group, Fixed and Land Mobile Services, Directorate

of Spectrum Policy and Planning, Director General of Resources and Standard

(DG SDPPI), MCIT

• Ratnawulan Oktovani, MASTEL Masyarakat TeleMatika Indonesia, Secretariat

• Santosa, Setyanto, Chairman, MASTEL, Masyarakat TeleMatika Indonesia

• Thoyib, Eddy, Executive Director, Masyarakat TeleMatika Indonesia, MASTEL

Side Bar Contributors

Author Affiliation Sidebar

Shishir

Belbase

Asian Development Bank Building Revenues in Emerging Markets

Amanda

Hu

Alcatel-Lucent Mobile Market Drivers in Growth Economies:

Indonesia

Mina Jun Visiting Scholar, Marshall School of Business,

University of Southern California,

SungkyungKwan University (SKKU)

Samsung’s Strategy in Southeast Asia

Ibrahim

Rohman

Chalmers University of Technology, PTC

Young Scholar 2014

Demand for Broadband in Southeast Asia

Rashid

Shafi

Sr. Exec. VP & Chief Strategy Officer, Multinet,

Pakistan Private Ltd.

Francis

Pereira

Assoc. Clinical Prof. Marshall School of

Business, University of Southern California

Policy Drivers in Select Asian Markets

David

Sawcer

Assoc. Prof. Keck School of Medicine,

University of Southern California

Indonesia’s Health and the Potential of ICTs

Sandy

Walsh

Dir. Social Innovation Group, Asia Pacific,

Cisco

Cisco’s Networking Academies in Indonesia:

providing technical training for the modern

workforce

Pakistan Philippines Thailand

PTC BBR4

Possible Markets for 2016

• 150 million mobile

subscribers, 7-10%

have smartphones,

77% of mobile phone

population between

21 and 30 yrs.

• 105 million mobile

subscribers, solid

growth, investment in

broadband, penetration

low (7 million).

• ARPU comparable to

Indonesia

• 96.3 million mobile

subscribers, 66%

rural, 30% are 3G