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Long Road to Achieve Healthy Competition in Telecommunication Industry

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The tariff war in the telecommunications industry, which had been played since the era of voice and SMS and then continued into the data, eventually made operators self-deprecating. Indosat Ooredoo who spoke out loud. This operator since led by Alexander Rusli does look the most vocal in the voiceless.

Indosat sent a letter to the MoCI and KPPU (Business Competition Supervisory Commission), requested that the government set the lower limit rate of the internet. Because of this data rate warfare, Indosat’s revenue yield yields continue to fall and year-on-year and this is considered dangerous because it is evenly distributed across all operators.

The operator proposed that the government be able to set a lower bound rate, exactly as it did in the transportation industry (taxi). Then, a seminar was held with the theme “Looking for Ideal Data Tariff” initiated by ITF (Indonesia Technology Forum) at Hotel Akmani, Jakarta (7/26/2017).

A discussion was attended by some stakeholders that the MCIT Rudiantara, Chairman and CEO of Indosat Alexander Rusli, president of ATSI (Association of Cellular Telephone Indonesia) Merza Fachys, Chairman of the Commission (Commission for Supervision of Business Competition), M Syarkawi Rauf, Commissioner ITRB (Indonesian Telecommunications Regulatory Body ) Ketut Pribadi, and Daily Chief of the Indonesian Consumers Foundation Tulus Abadi.

Not Lower Boundary Rate, But Formula

However, instead of agreeing to the lower boundary rate proposal, the government firmly rejected it. MCIT Rudiantara said the government would not issue the rules relating to the determination of tariffs upper limit and lower limit Internet data, as requested Indosat Ooredoo. Nevertheless, the government will only issue rules related to a reasonable profit-setting formula for operators.

 

Minister of ICT Rudiantara (Photo: Bambang/Gizmologi)

He reasoned, the government can not interfere in the determination of mobile data rates telecom operators. What can be done is to establish a reasonable yield determination formula for the operator. For information, Yield data is the total revenue of data divided by total data traffic.

“Obviously I did not set the floor price or figure but made a formula that allows the operator to still get the space to maneuver in the competition, there should be competition so that people get the product and service options,” said the man familiarly called Chief RA.

Rudiantara added that the government should be at an optimal point in viewing the interests of the telecommunications industry and society so there is a balance. “What is not allowed is the practice of predatory pricing, unhealthy operator competition to dominate the market,” said Rudiantara

After getting the rejection from the Minister of Communication and Information and the Commission, Alexander Rusli immediately clarified that the letter he sent on July 17, 2017, is only suggested tariff based on yield data. Therefore, he invites operators and regulators to negotiate about the formula that is the yield data. Where the yield of data continues to decline in revenue since three years ago, on the contrary, data traffic grew significantly feared dangerous for the future of the telecommunications industry.

Indosat said that the data yield in the first quarter of 2016 amounted to Rp 32,000 per gigabyte (GB), then this figure fell in the third quarter of 2016 to Rp 17,000 per GB, and in the first quarter of 2017 of Rp 14,000 per GB. Alex said similar things are also experienced by Telkomsel and XL Axiata. “The decline is increasingly irrational and can be no longer perspective to provide data services to the public,” said Alex.

Meanwhile, the polemic of data tariff is welcomed, Ketut said that his party in BRTI will immediately finalize the tariff formula as mandated by Article 28 of Law No. 36 of 1999 on telecommunications. “We are still discussing the internal, next month will collect the operators, and in about 3-4 months Ministerial Regulation (PM) on the data tariff formula will come out,” said Ketut.

The tariff formula consists of network element cost plus retail service activity cost and profit margin. That is, PM 9/2008 will soon be updated to accommodate data services.

Operator Consolidation
Another problem is that the telecommunication industry in Indonesia is feared to be unable to run sustainably if the operators are still inclined to run independently as they are today. “I ask the operator to consolidate because the telecommunication industry will not be sustainable if the operators do not cooperate,” said Rudiantara.

Lack of consolidation among operators according to Rudiantara will make the development of telecommunication infrastructure hampered. In fact, infrastructure development is intended for the benefit of the community. To that end, it continues to push more strongly so that operators can do consolidation. Due to the consolidation, the competition space in the telecommunication industry is expected to be more open and service to the community is getting better.

This consolidation measure is considered effective to help reduce the losses felt by some operators related to the increasingly tight competition, as well as streamline the number of operators in Indonesia. “In order for the industry better, I help reduce losses if baseball every day continue to lose,” said Rudiantara.

In line with Rudiantara, Syarkawi also considers the consolidation of operators with merger or acquisition corporate action can be an answer to the competition between cellular operators are also getting healthier. “Consolidation will bring competition among operators to be healthier,” said Syarkawi Rauf.

Meanwhile, Alexander Rusli said that logically consolidation is necessary for the telecommunications industry. Because by consolidating, the possibility of a price war will be smaller, and the bargain to the vendor will be higher.

However, Alex warned with consolidation, which will affect the number of operators are increasingly lean, feared the operator will act at will that will harm customers. So the role of the regulator is needed to find the balance point.

In addition, consolidation among operators is not as easy as imagined. “The logic is that consolidation must be done, if consolidation in terms of cost, it can, but consolidation from the aspect of the corporate structure is more complex, therefore it becomes shareholder’s decision,” he said.

Various issues that emerged proved that the task of government and stakeholders to realize the climate of competition in the healthy telecommunications industry is still a long way to go. There is a solution that you want to apply, but other issues arise.

This post is also available in: idIndonesia (Indonesian)

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