ICT Minister Rudiantara Plays Down Concerns Network Sharing Will Stop Telcos From Expanding Own Service

The Jakarta Globe – Jakarta. Information and Communications Technology Minister Rudiantara played down accusations that his idea of active network sharing will make operators reluctant to build new infrastructures and cost Indonesia around Rp 3.5 trillion ($269 million) annually in lost revenue on the back of unhealthy competition.

“We are entering a multi-operator regime but each of the operator is on a different economic scale, hence we’re unable to build the sector efficiently,” the minister told the Jakarta Globe on Thursday (20/10).

Active network sharing — a concept introduced in the draft of the upcoming telecommunication regulation revision — will require telecommunication providers to share their network and frequency allocation.

Rudiantara argued that the practice may save around 30 percent of the operator’s investment costs.

“Who said [that active network sharing will stop new infrastructure being built]? A well-arranged competition would in fact increase the industry’s productivity,” he said on the side of Andrew Tani Research’s “Manager-Leader: The Right Cure for Organizations” seminar in Jakarta.

“I want to lower overall costs for the industry. The business of each operator is not my business but it is the business of the stakeholders. […] My business is [to find out] how to make the industry sustainable but not at the cost of the market,” he said.

Previously, Yustinus Prastowo, executive director of the Center for Indonesia Taxation Analysis (CITA) said active network sharing will cost Indonesia around Rp 3.5 trillion in lost revenue annually, posing another risk on an already decreasing revenue collection.

“Unhealthy competition, such as a price war, will drag industry’s revenue down and in turn lower the state revenue as well,” Yustinus said.

Yustinus referred to Rudiantara’s plan to revise two government regulations, one on telecommunication organization and another one on satellite orbit and frequency, with a claimed initial objectives to improve the telecom industry’s efficiency and speed up investment in the broadband network.

The revision will force telecom operators, which are also network providers, to share its network with rivals — which will make them think that constructing their own vast network would be tantamount to doing the dirty work for their own rivals — and to abide by a new pricing cap for network sharing, Yustinus said.

Should the revised regulations come into effect, operators will be able to offer more discounts for customers to gain new market without the fear of making losses as they can use the fact that they have been offering discounted rates to reduce their own tax payment, he said.

The cellular market in Indonesia is currently controlled by just a handful of companies, including Telekomunikasi Seluler (Telkomsel), Indosat — which had rebranded itself as Indosat Ooredoo, XL Axiata and Hutchison 3 Indonesia.

According to CITA’s calculation, if the revised regulations get a green light, the government will lose Rp 245 billion in non-tax revenue, Rp 1.4 trillion in value-added tax, Rp 559 billion in income tax and Rp 1.3 trillion in dividend from Telkomsel — the state-controlled telco and the only telco that paid income tax in 2015 as the other telcos claimed to have made losses.

Even though the new pricing cap and the price war seem to benefit customers, at least in the short term, it will severely threaten the sustainability of the industry in the long run, Ombudsman commissioner Ahmad Alamsyah Saragih said.

“We are doing a study on potential maladministration [from the upcoming revisions],” Alamsyah said.