1. Indonesia’s WiFi Access Innovation Usable Knowledge for Growing the Telecom Sector Park Hotel, New Delhi, March 6, 2006 Divakar Goswami & Onno Purbo

2. Research Objectives 1. Why does Indonesia have more Wi-Fi deployed to connect to the Internet than most developing countries? 2. What lessons can we learn from WiFi innovations in Indonesia for other developing countries? 3. What steps must be addressed for hastening Internet growth in Indonesia?

3. What is WiFi? Wi-Fi is based on a family of standards that allow data to be transmitted at high speeds wirelessly up to 15 kilometres away.  802.11 (2Mbps); 802.11b (11Mbps); 802.11a (54Mbps); 802.11g (54Mbps). Where wired infrastructure is poorly developed (rural regions) wireless technologies like Wi-Fi, can be a viable solution to bridge digital divide. Many countries, including USA, EU, India, Indonesia etc. have unlicensed portion of 2.4 Ghz band necessary for Wi-fi. Advantages: Quick deployment time, low-cost, minimal rights of way needed, “free” bandwidth. Disadvantages: Prone to interference, weather conditions, steep range/bandwidth tradeoff, doesn’t offer carrier class reliability.

4. Why WiFi? Has WiFi deployment in Indonesia led to higher Internet access compared to other developing countries?

5. Internet penetration 1.031.753.769.646.8634.5360.9747.1750.88 -0.010.020.070.020.4423.31810.1 Internet Users Broadband users

6. Internet growth rate comparison India’s CAGR for an eight-year period between 1998-2005 was 58.4% in comparison with Indonesia’s CAGR during the same period of 35%. Per capita: Indonesia-$3500, India-$3100

7. Why Study WiFi in Indonesia? There is more WiFi deployment in Indonesia than most developing countries:  40 towns and cities in different islands have WiFi deployed by entrepreneurs WiFi deployment in other developing countries (Cambodia, Costa Rica, India, Bhutan etc.) small-scale, experimental basis, non- commercial. Compared to developed countries, WiFi uniquely deployed in Indonesia

8. Typical ISP Network Infrastructure Network Access Network Twisted copper pair ADSL Dialup Fiber optic Link to higher tier ISP ISP A ISP B ISP C Coax cable Cable modem

9. Network Characteristics-Indonesia Infrastructure Network Access Network Neighbourhood Network 50 houses+ $35/pm Corporate Customer $200/pm UTP Cable ISP A WiFi 2.4 IIX Ethernet Ring Microwave ISP B ISP C Ethernet School B School C Wifi 5.8 WiFi 5.8 House School A $4000/pm (Internet link+ international bandwidth) ADSL UTP Cable

10. Uniqueness of Indonesian WiFi WiFi deployed in Indonesia in unique manner:  Not inside home; not available for free.  Blurring of access and infrastructure network; used as low-bandwidth backhaul; up to curb WiFi, last mile aerial cable.  Many tiered retailing of Internet service.

11. Innovations Around Constraints Inadequate supply of network infrastructure-”backbone” & leased lines  WiFi fills “missing link” High price of last mile infrastructure, i.e., domestic leased lines  WiFi provides service at substantially lower costs High price of international bandwidth  “Unlegal” use of satellite for international link High retail price of Internet Service  Unlicensed reseller-ISPs using WiFi to recoup high price

12. Annual Leased Line Prices- Domestic & International 2Mbps link2km200km IndonesiaUS$18,000US$45,000 IndiaUS$376.00US$7,603 EU Benchmark US$4,802US$9,219 Data compiled from Lokanathan, lirneasia.net, EU 10 th report, interview with Indonesian ISP & Network Service Provider Ratios India EU 1:48 1:4 Ratios India EU 1:6 1:5 Full- circuit INDOSAT (Incumbent) DT Putra (Satellite link) India (price ceiling) EU (Denmark) Benchmark 2 MbpsUS$108,528US$146,400US$29,555US$36,868 India EU 1:4 1:3 India EU 1:5.0 1:4.0

13. Data from Indonesian ISP provider & BSNL, India BandwidthIndonesiaIndiaRatio 64 KbpsUS$393US$1283:1 128 KbpsUS$639US$2303:1 256 KbpsUS$1180US$3963:1 512 KbpsUS$2596US$6124:1 1 MbpsUS$3776US$9704:1

14. Data from PT Telkom, Indonesia & BSNL, India Comparison of ADSL Retail Prices (monthly) in Indonesia & India BandwidthIndonesia*India**Ratio 384 Kbps Usage limit: 1 GB* 2GB** US$74USD$233 : 1 512 Kbps Usage limit: 2 GB* 5GB** USD$93USD$412 : 1

15. Barriers to Market Participation Telecom servicesTelecom operations Fixed wireline localExclusive right 1996-2010 PT Telkom Fixed domestic LDExclusive right 1996-2005 PT Telkom Fixed wireless localLimited competition (PT Telkom & Indosat ) Fixed internationalDuopoly 1995-2004 (Indosat & PT Telkom) MobileCompetitive (Satelindo, Excelkomindo, Telkomsel etc.) Internet service provision(Quasi?) Competitive Currently 124 ISPs official, 54 unlicensed No competitionLimited competitionCompetitive

16. Barriers to Internet Growth: Some Solutions Inadequate supply of network infrastructure  (a) introduce more players to extend network [policy]  (b) government invests in rolling out network High leased line prices  (a) introduce more players in leased line market [policy]  (b) regulator introduces access regime for leased lines  (b) regulator compels operators to lower prices High price of international bandwidth  (a) introduce more players in international gateway market [policy]  (b) regulator issues price ceiling like in India High Internet retail prices  The above steps will take care of high retail price Is Policy & Regulatory environment conducive to above solutions?

17. Regulatory environment Minister of Communications and Information Technology DGPT Telecommunications Regulatory Committee (BRTI) DDG of Adm. Affairs DDG of Frequency Management DDG of Telecom & IT DDG of Standardiza tion DDG of International Affairs Notes : BRTI (Indonesian Telecommunications Regulatory Body) Line of Command Line of Coordination Report to DDG of Pos  DG POSTEL is an unit of the Ministry of Communication & IT  Two regulatory bodies: DG POSTEL & BRTI  BRTI under-staffed, powers under transition, chairman is DG of POSTEL

18. Regulatory environment  Exclusivity clauses extending historical monopolies Indonesian govt owns 51% share in PT Telkom & 15% in Indosat plus “golden share”  Structure of licenses preventing ISPs from deploying infrastructure Licenses for Telecom Network & Service providers  No local loop unbundling Exclusivity until 2015  No regulation of leased line prices Non-regulation of uncompetitive market

19. Lessons for the Indonesia Wi-Fi “innovations” in Indonesia are not a result of enlightened policy designed to extend communication infrastructure to unserved areas but rather a workaround solution to hostile market and regulatory conditions. Any sustainable development of Internet growth in Indonesia must address policy & regulatory environment-credible regulatory reform For quickest results, regulator must reduce leased line prices. Number of studies have shown the correlation between lower leased line prices and rapid diffusion of the Internet (Petrazzini & Guerrero 2000; Fan 2005;) Findings from this study are being used by stakeholders and media to pressure government to lower leased line and international bandwidth prices.

22. Lessons for India & developing countries Hastening of broadband Internet deployment in India & developing countries if ISPs can use Wi-Fi in the access network to bypass incumbent’s local loop. Wi-Fi can bridge digital divide by providing Internet connectivity leap-frogging difficult terrain and lack of wired infrastructure in rural areas. Wi-Fi deployment can be commercially viable.