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MARKET INTELLIGENCE REPORT ON
November  2008

INTERNET SERVICE PROVIDER (ISP) INDUSTRY IN INDONESIA


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Introduction

Internet Service provider (ISP) entered a new era in the past three years after PT Telekomunikasi Indonesia Tbk (Telkom) offered broadband internet service in 2006 with a cheap tariff. Since then the number of subscribers of broadband internet has continued to scale up.

Previously the number of internet users in Indonesia grew sluggishly as access service through dial up using telephone network of Telkom was not up to expectation with low speed. Meanwhile, high speed internet access offered at that time was too expensive that only corporate subscribers could afford to use that service.

Internet users is growing in number  with the launching of Hybrid Fiber Coaxial (HFC)-based internet broadband access offered by First Media with low tariff  although the coverage  was  limited  in Jakarta and a number of other large cities.

Until, now internet service provision business in Indonesia is still dominated by companies having telecommunications networks such as Telkom, Indosat and Excelcomindo. A company which is expected to come on line soon and become a powerful rival in  the ISP business is PT Indonesia Comnets Plus ( Icon+). This company also has wide  network through electrical cables that could be developed  for internet  connection(Broadband over power line). Meanwhile, most of other ISP companies serve only as internet service operators   depending on network  providers.

The number of internet service subscribers is expected to grow faster   with the increase in the popularity of mobile internet access through cellular networks. Higher speed and decline in tariff make access through mobile internet potential competitors to be faced by other internet access providers.

Dial up internet access technology pushed aside by broadband internet

Internet technology  is not new  in the world of computer. Internet is only an expansion of computer network, which has long been used in various agencies or companies since the 1960s the technology is developed by the academic world as educational infrastructure in the United States. In 1983 the U.S. National Science Foundation (NSF) opened internet networks between universities called NSFNet.

Apart from  NSFNet  there is a number of other networks  used  by government and he business sector.  In 1990, the networks were connected with TCP/IP  technology to be known as internet. In Indonesia there are a number of products of internet connections such as dial up, ADSL (broadband), cable, dedicated, wireless, and mobile connections.

Dial up

Internet connections through dial up are made by connecting computer with certain number through cable fixed telephone networks of PT. Telkom.

This product has weaknesses in access speed maximum only 56 kilo bit per second (Kbps). It uses telephone communication line that could not be used for voice communication at the same time. Consumers also have to pay local telephone cost to the owner of the network that is PT. Telkom.

Dial up product  is offered  mainly by ISPs in  Indonesia. The main layer is PT. Telkom with product TelkomNet Instant, which was launched in 2004. Telkomnet Instant service has superiority over its competitors in that it controls cable fixed telephone networks (fixed wire line) that the price it offered is very competitive at Rp 165 per minute for networks and internet connections.

Connections that could be accessed from the number of 080989999 do not need registration of subscribers first and without monthly payment. Meanwhile, other players  like  CBN put up tariff based on access time depending on the type selected.

The subscribers of other ISP also have to pay registration fee and monthly  fee. They  also have to pay for the local telephone  pulse  to Telkom  as the owner  of cable fixed telephone networks .

With the expansion of high speed internet connections technology internet access  grows in speed  resulting in a decline in the number of users of dial up connections.

Asymetric Digital Subscriber Line (ADSL)

Asymetric Digital Subscriber Line (ADSL) is an advancement of dial up technology and connections  using copper cables  that the limited  capacity  of dial up connection  could be increased  that it could transmit data  with larger volume (broadband).  

The technology of ADSL could not be expanded on all fixed wire lines of Telkom, as the service could only be accessed through copper fixed telephone networks of Telkom which has been modified into Multi Media Access (MMA).

Originally  the broadband service was available only in  the Greater Jakarta  area  but now it could be accessed  from 27 large cities  in Indonesia including  Sumatra, Java, Bali, Kalimantan,  and Sulawesi.

ADSL could receive data (downstream) with a speed of 512 Kbps and transmit data (upstream) with a speed of only 64 Kbps. In addition, ADSL also could separate internet channel from voice channel hat fixed telephone could be used when the channel is being used by internet. This come with the modem technology which work  on the frequencies of 34 kHz  to 1.104 kHz, while  dial up uses modem, which works  on the frequency of below 4 Khz   that could channel  data with a speed of 56 Kbps.

In Indonesia,  ADSL connection is monopolized  by Telkom. Other  ISPs like CBN, Biznet,  and  Centrin also offer ADSL service  but  they only resell  the  product of  Telkom. Telkom launched  ADSL service  with  the brand of  Speedy.

The difficulty in  the development of ADSL in  Indonesia  is limited  networks  with quality that could be expanded  into Multi Media Access, as most copper cable networks  owned by Telkom have been too old. 

Only 25%  or 2 million lines  of fixed telephone of PT Telkom could be used for   ASDL service.

Internet broadband cable

High speed internet access  could also be made through fiber optic  and cable network of Hybrid Fiber Coaxial (HFC) or known as cable internet.  In  Indonesia internet service becomes one with cable television  service. 

A number of players offering this service include PT Indonusa Telemedia, which is subsidiaries of PT. Telkom (Telkom Vision) and Kabel Vision managed by PT Broadband Multimedia.

Telkom Vision which uses HFC network  could send  data  with a speed of  between 64 Kpbs  to  512 Kbps. Meanwhile,  Kabel Vision could transmit data  with a  speed of up to 2 Mbps.

Kabel Vision cooperates with 7 ISPs including MyNet, LinkNet, Indosat Net, CBN, UniNet, IndoNet, and Centrin.  Subscribers of the 7 ISPs  could use he channel of Kabel Vision.

Dedicated

Internet access is widely used by corporate subscribers that need high speed access with minimum snag. Therefore, most of the users of the dedicated service are corporate subscribers.

Dedicated connection service could be channeled through several types of  media  such as  copper cables,  microwave, fiber optic, and satellite.  Almost all ISPs operate  this service  but only a few having own networks. Most ISPs serve only to provide connections while network is provided by the consumers.

Among the players  like  CBN  and  Biznet have networks in the form of copper network (wiring)  and  fiber optic in the Greater Jakarta area . CBN launched copper network  in the high class  areas of Sudirman -Thamrin  and  Pondok Indah in  Jakarta.

Meanwhile,  Biznet  develops fiber optic network in the expensive district of   Kuningan -Sudirman-Gatot Soebroto-Slipi- TB Simatupang-Pondok Indah which is known as Metro Ethernet. So far there are 108 buildings in this area connected with Metro Ethernet.

WiFi

The expansion of wireless technology has also covered internet connections. In the past several years  the technology of wireless fidelity (WiFi) which makes possible internet access  without cable  through network card of Wi-Fi 802.11 a/b/g has been applied  for internet connections .

Wireless access through the technology of wireless fidelity (WiFi) known as hot spot is generally found in strategic locations like big shopping malls, cafes, airports, and public facilities, hotel, and apartment in cities in Indonesia. Until now the number of hot spots provided by ISPs in Indonesia has reached hundreds.

Cafe Starbucks, which has outlets spread in tens of large cities in Indonesia, constitute one of growing hot spot locations. In Starbucks, there are a number of players providing  hot spot access.

Hotspot locations have continued to grow  mainly in large cities . Several players  such as  Telkom, Indosat, Biznet and  CBN operate this service . One of the players Indosat has launched hot spot service in 19 cities in Sumatra, Java, Bali, Kalimantan, and Sulawesi.

Meanwhile, Biznet has launched hot spot service in 27 locations - 4 in hotel, restaurants and office buildings and 23 in Cafe Starbucks.

Mobile

The product of mobile access is conducted through cellular telephone network both by GSM through his technology of Global Packet Radio Service (GPRS) and Enhanced Data rate GSM Evolution (EDGE). In addition, the service of mobile internet is also available  in cellular telephone  with CDMA technology. 

In providing access, ISP companies cooperate with the owners of the cellular network. One player Telkom provides connections through Telkom Flexi (CDMA). Several players cooperate with Fren (mobile 8) such as  CBN  and  Radnet  to launch similar products.

With the 3G technology , players like Telkomsel, Indosat M2  and  XL  could serve internet access  through GSM-based cellular telephone  through the technology of high-speed downlink packet access (HSDPA).

Internet connections  service

Service of internet access  in  Indonesia  was originally made through telephone network or dial up  networks. For almost 10  years after the launching of commercial internet access,  internet access  in  Indonesia is dominated by connections using copper cables for  Dial Up based internet.

Only in the past three years high speed internet access  or broadband internet began to gain popularity  after PT Telkom offered  internet access based on the technology of Asymetric Digital Subscriber Line (ADSL) named Speedy. Dial up- and ADSL based  internet connections are dominated by PT Telkom  as the owner of fixed wire lines.

Since  2007,  broadband internet service began  to have strong competitors  with the growing number of subscribers  using ISP service  with modem cable or   HFC (Hybrid Fiber Coaxial).

Service offered by  the ISP is more attractive  as it is combined  with cable TV service and the tariff is competitive  facing other ISPs that only sell  internet service.

ISPs using HFC include  Kabel Vision  and  PT Broadband Multimedia (now PT First Media Tbk.)  And   Telkom Vision from PT Indonusa Telemedia, which is a subsidiary of PT Telkom. 

ISPs with fiber optic based connections are also growing  expanding their networks to include individual or household  users . Previously the users were only companies  in high rise buildings . A number of ISPs which aggressively promote  their service  to individual n and household users  include Biznet  and  CBN.   

Network providers and Internet Service Providers

Based on license registered at  the post and telecommunications directorate general, there are 298 ISPs   and 44 network providers in 2007 . The number of licensed ISPs   continued to increase  from 2002 to 2007 , but there are many of them have not effectively been operational.  Based on data at the APJII, only 169 of the 298 holders of the ISP licenses in 2007 were effectively operational.

ISP players

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MONTHLY REPORT
INDONESIAN COMMERCIAL NEWSLETTER (ICN)
 
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ICN - November 2008

FOCUS: COULD THE INDONESIAN REAL SECTOR WEATHER THE GLOBAL FINANCIAL CRISIS?

INDUSTRY PROFILE:

INTERNET SERVICE PROVIDER (ISP) INDUSTRY

DEVELOPMENT OF PAY TV (CABLE TV) SERVICE INDUSTRY AMID TIGHT COMPETITION
  • Backgrounds
  • Technology used
  • Technology and facilities of Pay TV operators in Indonesia
  • Development of business in television broadcasting in Indonesia
  • Development of Pay TV operators
  • New Investment
  • Number of Subscribers
  • Market penetration of Pay TV
  • Profiles of Main Players
  • Astro controversial case
  • Indovision has a 51.2% share of the market of Pay TV
  • Market Value exceeds Rp1 trillion
  • Subscription fee tends to decline
  • Competition and marketing strategy
  • Government Policy
  • Conclusion and Prospects
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