Indonesia’s WiFi Access Innovation Usable Knowledge for Growing the Telecom Sector Park Hotel, New Delhi, March 6, 20

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

2. Research Objectives • Why does Indonesia have more Wi-Fi deployed to connect to the Internet than most developing countries? • What lessons can we learn from WiFi innovations in Indonesia for other developing countries? • 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 InternetUsers 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. Link to higher tier ISP ISP C Fiber optic ISP A ISP B Twisted copper pair Coax cable Dialup ADSL Cable modem Typical ISP Network Infrastructure Network Access Network

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

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 Ratios India EU 1:6 1:5 Ratios India EU 1:48 1:4 India EU1:4 1:3 India EU 1:5.0 1:4.0 Data compiled from Lokanathan, lirneasia.net, EU 10th report, interview with Indonesian ISP & Network Service Provider

13. Data from Indonesian ISP provider & BSNL, India

14. Comparison of ADSL Retail Prices (monthly) in Indonesia & India Data from PT Telkom, Indonesia & BSNL, India

15. Barriers to Market Participation Limited competition Competitive No competition

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 • 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 Minister of Communications and Information Technology Telecommunications Regulatory Committee (BRTI) DDG of Adm. Affairs DGPT DDG of Telecom & IT DDG of Frequency Management DDG of Standardization DDG of International Affairs DDG of Pos Notes : BRTI (Indonesian Telecommunications Regulatory Body) Line of Command Line of Coordination Report to

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.