By : Jan van Rees, World Bank

Contents

Current status Main issues to be addressed:

Broadband backbone Mobile/wireless Broadband Fixed Broadband

Investments required Role of Central Government Recommended Regulation Role of local Government Role of Public works and PLN Conclusions and proposed Time Schedule

Current status of Broadband in Indonesia

In West-Indonesia the main fiber optic backbone between all provinces is in place

Submarine routes to abroad are available and new routes are added Broadband access still in early stage:

Mobile Internet/broadband shows rapid growth and is the main broadband access for individual users

Technology Number of Subscribers (latest available data)

Providers

Fixed broadband ADSL 1,300,000 (1) Telkom Cable internet 500,000(2) First Media FTTH 4,000(3) More than 5 Wireless broadband Mobile – 3G, PC Based

> 3.0 million(4) Telkomsel. Indosat, XL, also some of the other 3G/UMTS and CDMA EV/DO mobile operators

Mobile – 3G, Phone Based

> 25 million(5) Telkomsel. Indosat, XL, also some of the other 3G/UMTS and CDMA EV/DO mobile operators

Regional comparison

Broadband Quality

Source : Global broadband quality study sponsored by Cisco

Main issues to be addressed

Broadband backbone Inter province backbone in Sumatra-Java-Kalimantan-Bali-South

Sulawesi exists East Indonesia is missing (Palapa Ring East) Extension to many Kabupaten still to be implemented

Mobile/wireless Broadband 3G deployed on part of the network in 2100/1900 MHz band, focused

on cities WiMAX auctioned Requires cost-effective mobile broadband everywhere

Fixed Broadband Monopoly on copper infrastructure ADSL (up to 1 Mb/s, Speedy, PT

Telkom) Monopoly on cable TV network Very limited Fiber To The Home Requires large scale fiber optic deployment

Backbone investments required

Palapa Ring East: $ 186 million Completing Palapa Ring East with Sorong-Manokwari-

Biak-Jayapura and Sorong-Fak-Fak- Timika-Merauke. Estimated at $ 145 million

Extension to remaining Kabupaten Sumatra-Kalimantan- South Sulawesi, 9.820 km, $ 113 million of which $ 31 million is expected to be not feasible commercially

Extension to Kabupaten in Eastern Indonesia. If possible $ 225 million. However most non-coastal Kabupaten in Papua lack any infrastructure to lay fiber optic cable along (no roads, pipelines, etc.). Some intermediate use of microwave might be required.

Total: $ 444 million + (part of) $ 225 million Kabupaten

extensions in Eastern Indonesia

Mobile/Wireless broadband access investments required Passive infrastructure (towers and facilities) already

established Upgrade of active radio network required (3G

everywhere, future upgrade to LTE) Backhaul from towers to backbone On the largest network about 5.000 out of 32.000

basestations are 3G. Current 3G spectrum is not cost effective for rural roll-out (would require many more towers). However if 850/900 MHz is used a simple overlay can be deployed. Estimated costs: $ 500 – 1000 million

Backhaul is crucial. Could cost around the same amount as the active infrastructure

Note: Short-term, activate EDGE feature everywhere instead of only GPRS

CAPEX/OPEX impact

Source : GSA Information Paper UMTS 900 September 4th, 2008

Fixed broadband access investments required

Future requirement is 100 Mb/s+, many countries are deploying FTTH (like Singapore, Australia, etc.)

Main investment (50-80%) is passive infrastructure The largest investment in the future telecom

infrastructure will be in the migration to fiber optic access networks

Assuming $ 800/home then the replacement of current copper network (8 million lines) would be in the order of magnitude of $ 6400 million. Connecting up to 40 million homes would increase this to $ 32000 million

Smart and opportunistic deployment required to reduce investment level

Note: Short-term, deploy ADSL on all copper networks,increase speed to technology limit (20 Mb/s) wherepossible

Analysis

The mobile (broadband) market is highly competitive. Operators have made, and continue to make, multi-billion $ investments each year

The number of mobile operators/networks is quite high and consolidation should be anticipated. Fewer mobile networks & more MVNO’s are a likely scenario.

Use of lower frequency bands (850/900 MHz) is critical for cost-effective mobile broadband everywhere

Fixed broadband (ADSL) over copper wires, has been more or less a monopoly business although cable Internet is a competitor. Investments have been limited

A more competitive fixed broadband market is required. This implies a transition from “monopoly” on copper to “competition” on fiber.

Source : Point Topic Broadband by technology Q4 2008

Central Government role

Timely issuance of permits and rights of way Facilitate coordination between entities responsible

for different infrastructures for example ensuring that construction of new roads, railways, power lines and pipelines provides for co-location of fibre-optic cables. Such practice is widespread around the world for new infrastructure development

Financial incentives like a minimum subsidy for a backbone extension to a marginal Kabupaten in return for Open Access and early deployment (ICT fund)

Demand aggregation

Regulatory measures required (1)

Infrastructure sharing. For towers this has already been done. This should be

extended to include other passive infrastructure like ducts, poles, dark fibers, etc.

Open access requirements: Passive infrastructure for essential and not easily replicated

infrastructure Active layer/service layer. IP level is open and net neutrality

should be maintained The transition from “monopoly” on copper to

“competition” on fiber implies that a fully “unified” license is provided: Licensed operators can deliver all services (local, SLJJ, SLI,

Mobile, Internet, IPTV, etc.), typically over the broadband access. Current legacy regulation focused on individual services should be phased out

This is a prerequisite for a competitive fixed broadband market.

Regulatory measures required (2)

Equal access to buildings Remove all monopoly practices related to access to the

building and the in-building cable system. Allow non-Telco entities (construction companies, real

estate developers, local Government) to construct and provide passive infrastructure. However mandate open access

Number portability (mobile & fixed) for consumer protection and additional competition

Mobile/wireless broadband Allow in-band migration to 3G/4G technologies Release more spectrum for the long-term (700 MHz, 2500

MHz). 700 MHz requires an accelerated migration from analogue to

digital TV to free-up the Digital Dividend 2500 MHz is currently mostly used for satellite TV

Regional/local Government role What can be done to accelerate deployment? Timely issuance of permits and rights of way Provide and prepare passive infrastructure whenever

constructing other infrastructure like roads. Example:

Kabupaten without extension to the backbone and without

fiber infrastructure Invest in the passive infrastructure to lower the barrier

for entry. Stand-alone or as co-investor. Aggregate initial demand (schools, puskesmas,

Government offices) and tender this demand in return for early service and deployment of open access backbone and local fiber optic network

Public Works role

By default Public works should incorporate the need for ducts whenever constructing roads, etc.

Arrange a general agreement between Telco’s and the Government with respect to the use of passive infrastructure.

PLN role

PLN is operating a very large passive infrastructure of power lines and electricity access network on poles.

Fair and equal access to this passive infrastructure is important to deploy cost-effectively.

Arrange a general agreement between Telco’s and PLN with respect to the use of this passive infrastructure.

Conclusions (1)

The future of telecom is Broadband (10+ Mb/s today and 100+ Mb/s tomorrow). Fixed broadband is essential to provide real high capacity

cost-effectively Mobile broadband can be deployed fast to provide initial

connectivity Main backbone (West+ East) and extension to all

Kabupaten in West Indonesia + South Sulawesi requires a remaining investment of $ 444 million. Remaining (in particular non-coastal) Kabupaten in East

Indonesia Eastern Indonesia might require intermediate solutions like microwave

Transition from “monopoly” on copper to “competition” on fiber through regulatory steps: Fully “Unified License” for all services and phase out of legacy

service by service regulation. Infratructure sharing Open access

Conclusions (2)

Mobile broadband in the lower frequency bands (850/900 MHz) is critical for cost-effective rural deployment

Short-term fixes based on existing infrastructure: Deploy ADSL at all local PSTN switches. Where there is copper

there should be ADSL Activate the EDGE feature on the GSM network everywhere to

provide, almost instantly, better mobile internet all over Indonesia

Use demand aggregation and investments in passive infrastructure to accelerate fiber optic roll-out of backbone and access.

Consider use of the USO/ICT fund for those areas which are commercially not feasible.

Local/regional Governments can play an important role to realise broadband in their area. However it is important that the Central Government arranges the regulatory prerequisites to create a “competitive” fixed broadband market.

Proposed time schedule

2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 2012 2013-laterShort-term action to better use existing infrastructure Roll-out of ADSL to all PSTN switches with terrestrial connectivity Plan Implement Implement Implement Implement Activate EDGE capability on every GSM basestation Plan Implement Implement

Broadband backbone: Palapa Ring East Palapa Ring East: Lombok - Kupang: Announced start end-Sept 2009 Announced Implement Implement Implement Implement Palapa Ring East: Manado-Sorong-Ambon-Makassar: Expected start Dec 2009 Plan Implement Implement Implement Implement Implement Palapa Ring East: Sorong - Jayapura & Sorong - Merauke Plan Plan Implement Implement

Broadband backbone: Extension to remaining Kabupaten Shared (passive) infrastructure is going hand-in-hand with broadband access in regions Parallel with more broadband access deployment

Create a competitive broadband access market for Next Generation Access (fiber optic based) Duct/passive infrastructure sharing regulation Plan Plan Implement Implement Implement Regulation to facilitate access to buidlings by multiple operators Plan Plan Implement Implement Implement General arrangement between Government and Operators for access to passive infrastructure Plan Plan Implement Implement Implement

Unified acces license, one license to offer all telecom services. Any broadband provider should also be able to offer telephony over broadband. Major reduction of current legacy PSTN oriented regulation

Plan Plan Implement Implement Implement

Remove any restrictions for VoIP over broadband Plan Plan Implement Implement Implement Allow and support local initiatives to construct local open broadband access networks Plan Plan Implement Implement Implement

Aggregate early, initial, broadband demand (schools, health care centers, Government Offices) and tender this. Initially current broadband followed by NGA broadband

Plan Plan Implement Implement Implement Implement Implement Implement

Provide more E-Government services ContinuousContinuousContinuousContinuousContinuousContinuousContinuous Continuous

Accelerate mobile broadband also in rural areas Allow mobile broadband (initially 3G, later LTE) in lower frequency bands 850 & 900 MHz Plan Implement Implement Implement Implement Facilitate in-band migration in general to allow more spectrum efficient technologies Plan Implement Implement Implement Implement

Provide additional spectrum to support Mobile/Wireless Broadband growth Auction remaining part of 2.3 GHz band (currently called Mobile WiMAX, potentially also LTE) Plan Plan Implement? Free up the 700 MHz band (Digital Dividend), currently expected 2018-2020, consider earlier Plan Plan Plan Plan Plan Implement? Free up the 2.5 GHz band for mobile/wireless broadband Plan Plan Plan Plan Plan Implement?

Customer protection (& facilitating competition)Number portability for mobile & fixed numbers Plan Plan Plan Implement Implement Implement

Why are lower frequency bands so important?

850 and 900 MHz bands offer a much better coverage than 2100 MHz

Many countries do have very extensive rural areas which could benefit from 3G (mobile as well as in “fixed” deployment) to deliver telephony and broadband service

Typically spectrum use in rural areas is less intensive making it easier to allow in-band migration to 3G at much lower cost

Examples:� Telstra Next G network (850 MHz). Covers > 2.000.000 km2

� Elisa Finland/Estonia (900 MHz)� Vodafone New Zealand (900 MHz), Australia under

construction� Optus in Australia (900 MHz)� AIS Thailand (900 MHz)� Europe is anticipated to accept UMTS 900 widely, many

trials/plans on-going

No of UMTS basestations required

Source : UMTS Forum presentation

A lower frequency band results in a much more cost efficient roll-out in rural areas. UMTS 900 is already standardised.

Cell Coverage Comparison in typical urban case

Source : GSA Information Paper UMTS 900 September 4th, 2008

CAPEX/OPEX impact

Source : GSA Information Paper UMTS 900 September 4th, 2008

Example: Telstra HSDPA at 850 MHz

Source : Telstra presentation at Mobile World Congress in Barcelona 2008

3GPP standard allows > 200 km. Telstra demonstrated 2 Mb/s even up to 200 km for high elevation basestations and free of obstructions

Co-existence issues

UMTS 900 GSM 900 uncoordinated (2.8 MHz) UMTS 900 GSM 900 co-located (2.6 MHz) UMTS 900 GSM 900 micro/pico cells (> 2.8 MHz) Suggested frequency arrangements:

Source : ECC Report 82