Growing the Internet 3 July 2015

Connecting the (other) rising Asian titan – Indonesia Internet development focus

The Asia-Pacific Bureau of Internet Society recently released a study on Internet development focusing on the ASEAN region.  To coincide with the launch a series of roadshow events (talking forum) are being held in the countries of study, the latest one in Jakarta in May, with the collaboration of Singapore-based research firm TRPC.

Indonesia, known as the other titan in the region, is the largest economy in ASEAN, the 9th largest economy in the world, and is a member of G-20 countries. It represents the third largest democracy in the world and is home to the largest and most active social and mobile media users. Indonesia is both an economic and social powerhouse at the cusp of a major transformation.

According to a 2015 study by Price Water House on future economic powerhouses, identified Indonesia as the 5th largest economy in the world by 2030 and 4th largest economy by 2050.

To realise its potential and goal to become a Digital Society, Indonesia will need to transform itself from a commodity export-driven economy to a more broad-based economy which supports its growing young population with strong appetite for the Internet/ICT. The leadership in the country realised this early on. Measures began, first by liberalising the ICT and telecom market just under a decade ago. It was one of the first few countries in the region to enact a national open source legislation in 2008, and embarked on a governance reform under the Open Government Initiative and Partnership which the country pioneered with 7 other countries in 2011. More recently, the introduction of ‘Made in Indonesia’ initiative promises to pave way in transforming the country into a leading ICT industry player.

According to our study, Indonesia has yet to fully reap the benefits of the Internet. There remain several chokepoints that require immediate attention on improving connectivity in terms of basic access, affordability, coverage and performance (speed).

  • Around one third (36%) of its population has access to the Internet today via wireless broadband and less than 16% from fixed broadband. Mobile broadband is twice the size of fixed broadband and has been experiencing high growth rates since 2003, while fixed broadband remains stagnant. However, compared to its neighbours across the Straits–Singapore, Brunei and Malaysia–Indonesia remains an uncompetitive market in all four areas.
  • As a low-income country, the price for basic Internet services remains unaffordable for the general public at more than 5% of Indonesia’s GNI. The recommended minimum by ITU is 5% of GNI. Even so, Indonesia’s cost remains moderately high compared to countries like Cambodia and Vietnam.
  • In terms of multiple device ownership, Indonesia has only 15% of users owning multiple devices/handsets. To address this, the Indonesian Government has announced a new initiative to promote locally made smart phones.
  • Access to international bandwidth is relatively small at around 1.030 kbps/capita–comparatively lower than Malaysia (15 kbps/capita) or the Philippines (5 kbps/capita). This is partly due to its geography (archipelago terrain) and a combination of fragmented local network and spotty coverage, especially in areas far from regional urban centres or in smaller islands with low population density. This also impacts the speed of Internet access.
  • Indonesia’s average download speed is comparative low (4.77 Mbps), well below both the region’s average of 18 Mbps and the global average of 20 Mbps.

But it also has a lot of capacity for growth. Mobile-first policies and wireless technology are the best bet in connecting the rest of the population.

In terms of regional supply of international bandwidth and its future demand, the study finds the ASEAN region already well invested with overcapacity built in for future demands.

However, national capacity remains an ongoing concern. Investment in backhaul network and backbone infrastructure is emphasized and will help determine future quality of service, performance, and adequate capacity built up to accommodate last mile connectivity and growing mobile and data traffic.

Another missing link are more neutral IXPs and carrier neutral facilities which can further boost cost efficiencies at several levels as well as surfacing latent demand in the local market.

In terms of new application and services, Indonesia to some extent has shown remarkable potential. The ISOC study cited the mobile money payment system, a collaboration between three network operators using the PoS network (online banking and ATM) to create a single payment platform. This is the first of its kind in the world. It is important to note that there is a high percentage of Indonesian that do not have access to banking services and at the same time are heavily dependent on foreign remittances. In fact, Indonesia’s migrant workers have been a key contributor to its growing adoption of new digital solutions, including prepaid SIM cards, mobile payment, and cash payment systems.

A recent report by InMobi identified Indonesia as one of the up and coming application development nations.  This comes as no surprise given that the Indonesian market is made up of a large youth population eager to experiment and create.  This is something the Indonesians and its policy makers have clearly expressed and is very keen to exploit.

In short, building the right ecosystem with Internet-friendly policies to enable interoperability and interconnectivity will be key to creating a digital society. An advantage is that policy makers adopt a mobile-centric development framework that compliments the country’s abundant resources and characteristics—a rising middle class and technology friendly population among them. Also noting that the need to build an innovative and entrepreneur culture in Indonesia will require a degree of openness both in policies and market mechanism that allow people and ideas to flow freely. Only then can Indonesia create a thriving new economy, run by Indonesians for Indonesians.

Disclaimer: Viewpoints expressed in this post are those of the author and may or may not reflect official Internet Society positions.

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