Indonesia’s WiFi Access Innovation

Divakar Goswami & Onno Purbo

Indonesia overview

•World's largest archipelago-17,000 islands

•Poses a challenge in rolling out communication infrastructure and providing access to 241 million inhabitants of Indonesia, 4th most populous country in the world.

Project Objectives

What are the conditions that gave rise to WiFi becoming the access technology of choice for Internet in Indonesia?

Can WiFi access innovation in Indonesia be replicated in other developing countries?

What steps need to be taken for higher Internet growth in Indonesia?

Will highlight lessons learnt from Indonesian study that have regulatory relevance.

What is WiFi? Family of IEEE 802.11 standards with different throughputs for

wireless data transmission: 802.11 (2Mbps); 802.11b (11Mbps); 802.11a (54Mbps); 802.11g

(54Mbps). Range varies depending on use of antenna, surroundings,

transmission power. Typical 50m can be extended to 5kms. Many countries (USA, EU, Indonesia etc.) have unlicensed portion

of 2.4 Ghz (2400 Mhz to 2483.5 Mhz) including use of spread spectrum technology for uncoordinated sharing of band.

5Ghz to unlicense or not? 5.8 Ghz suitable for long range communication.

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.

Internet penetration

1.03 1.75 3.76 9.64 6.86 34.53 60.97 47.17 50.88

- 0.01 0.02 0.07 0.02 0.44 23.3 18 10.1

InternetUsers

Broadband users

0.17 0.39 0.4 2.4 3.81

11.95

23.32

33.89

52.49

0

10

20

30

40

50

60

Per 100 inhabitants

Internet Subscribers 2003

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%.

Internet Subscriber Growth: Indonesia & India

10

900

30003300

3800

5550

400 581 667.002 865.7061087.428

1500

5450

0

1000

2000

3000

4000

5000

6000

Year1995

Year1996

Year1997

Year1998

Year1999

Year2000

Year2001

Year2002

Year2003

Year2004

Year2005

India

IndonesiaTh

ou

sa

nd

s

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

Network Reality-Indonesia

Infrastructure NetworkAccess Network

Neighbourhood Network $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 5.8WiFi

5.8

HouseSchool A$4000/pm (Internet link+ international bandwidth)

ADSL

UTP Cable

Uniqueness of Indonesian WiFi

WiFi deployed in Indonesia but in unique manner: Not inside home; not available for free. Blurring of access and infrastructure network; used as

backbone; up to curb WiFi, last mile aerial cable. Many tiered retailing of Internet service…. WHY? To recover high Internet retail prices

What gave rise to peculiar access network in Indonesia?

Regulatory environment Non-independent regulator

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 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

Market environment

Lack of competition in infrastructure sector

Resulting in high leased line prices

High international backbone prices

Proliferation of unlicensed “reseller-ISPs”

Telecom services

Telecom operations

Fixed wireline local

Exclusive right 1996-2010 PT Telkom

Fixed domestic LD

Exclusive right 1996-2005 PT Telkom

Fixed wireless local

Limited competition (Satelindo)

Fixed international

Duopoly 1995-2004 (Indosat, Satelindo)

Mobile Competitive (Satelindo, Excelkomindo, Telkomsel etc.)

Internet service provision

Competitive Currently 124 ISPs official, 54 unlicensed

No competition

Limited competition

Competitive

Annual Leased line prices 2Mbps Link

Data compiled from Lokanathan, lirneasia.net, EU 10th report, interview with Indonesian ISP & Network Service Provider

Ratios India EU1:47.9 1:3.8

RatiosIndia EU1:5.9 1:4.9

2Mbps link 2km 200km

Indonesia US$18,000 US$45,000

India US$376.00 US$7,603

EUBenchmark (Denmark)

US$4,802 US$9,219

Comparison of Internet Prices (monthly) for Business Users in Indonesia & India

0500

1000150020002500300035004000

64 kbps 128 kbps 256 kbps 512 kbps 1 mbps

Bandwidth

USD

$

Indonesia

India

Data from Indonesian ISP provider & BSNL, India

Bandwidth Indonesia India Ratio

64 Kbps US$393 US$128 3.0:1

128 Kbps US$639 US$230 2.8:1

256 Kbps US$1180 US$396 3.0:1

512 Kbps US$2596 US$612 4.2:1

1 Mbps US$3776 US$970 3.9:1

Data from PT Telkom, Indonesia & BSNL, India

Comparison of ADSL Retail Prices

(monthly) in Indonesia & India

Bandwidth Indonesia* India** Ratio

384 KbpsUsage limit: 1 GB* 2GB**

US$74 USD$23 3.2 : 1

512 KbpsUsage limit: 2 GB* 5GB**

USD$93 USD$41 2.3 : 1

Lessons from the Indonesia Hostile environment (regulatory & market) led to WiFi innovations

by ISPs in the access and backbone network: High price of leased lines from incumbent, in many cases non-

availability and denial of access. ISP license conditions forbidding deployment of infrastructure. High retail prices for Internet service leading to sharing of connections

via WiFi.

In countries without a competitive or regulated leased line market, ISPs may find WiFi to be viable option for reaching customers and hauling data.

Given a choice, ISPs interviewed in Indonesia would prefer alternatives to WiFi. May also be the case in more “favorable” environments.

Number of studies have shown the correlation between lower leased line prices and rapid diffusion of the Internet (Petrazzini & Guerrero 2000; Fan 2005;)

Indonesia may be sitting on the cusp of explosive Internet growth if conducive regulatory and market conditions are created.

ISP in Jakarta Using WiFi as Access