Iwan Krisnadi

27 March 2010

Universitas Mercu Buana Program Pasca Sarjana Manajemen Telekomunikasi

1. The ICT sector is economically very large

2. The ICT sector growth rate is very high

3. The ICT sector enables and drives economic growth for entire economy

4. There are many ‘market failures’ in the ICT market if left unchecked

Global telecom revenues ~ USD 2 trillion (2008)

Global IT spending ~ USD 3.4 trillion (2008)

4.3 billion mobile phone subscriptions (2009)

577 million use phones to access Internet (2008)

India 19.9 million new subscribers a month (Jan

2010) Nearly 8 new subscribers every second!

China 8 million new subscribers a month (Sep 2008)

World >1.2 million new subscribers every day 7 billion text messages sent every day Two thirds of mobile users are from developing

countries

International Internet traffic growing 50% to 60% annually in the last few years

Source: ITU World Telecommunication/ICT Indicators Database

2006

Agriculture/commodities

ICT/Telecommunications

Industrial goods

OtherServices

Transport Insurance Software Banking

ICT is the ‘infrastructure’ for other economic activitiesWhy ICT (esp telecom) remains a priority

Examples from media and trade journals

RIVALS OF [incumbent] were celebrating last night after the [incumbent] was found to have unlawfully misused confidential customer information to try to stop its customers leaving for competitors.

The ruling was made by the [regulator] after hearing a case detailing how [incumbent]’s network arm would habitually inform its retail division of customers’ plans to leave. This allowed [incumbent]’s retail arm to try to "save" the customer.

The [regulator] has made it mandatory for telecom service providers to submit separate accounting statements for each service and product in every licensed area.

The move is aimed at addressing the concerns over cross-subsidisation and to eliminate predatory pricing of large telecom companies.

The [regulator] has also asked operators to submit yearly reports revealing details of the cost of capital employed, network architecture, capacity, volumes and future roll out plans.

Accounting separation has been a much awaited move for most private telecom operators as they felt that [incumbent] was cross subsidising its services to offer anti-competitive tariffs.

The [regulator] has unearthed a unique international case of alleged cartelisation by telecommunication service providers of cellphones, entering into an agreement to revise selling price of SIMs along with missed calls charges. The scam has been unearthed on a tip off of an informer under the informer reward scheme.

Details revealed that an informer provided ample evidence to [regulator], which consisted of print outs and of e-mails exchanged between Chief Executive Officers (CEOs) and high level officials of all the five cellular mobile telephone operators.

In July 2003, the [regulator] found [incumbent] undercut rivals, trying to corner the high-speed Internet access market at a key stage in its evolution. [incumbent] was fined 10.4 million for abusing its dominant market position. [incumbent] appealed.

Backing the [regulator] , the court said: (1) [incumbent] dominated the market with very high share, 8 times the number of ADSL subscribers of its nearest competitor (2) [incumbent] pricing, first, below average variable costs and, later, below average total costs, showed a plan to eliminate competitors. (3) The [regulator] correctly calculated the rate of cost recovery that led it to find predatory pricing.

The move by [x] to regulate interconnection rates follows uncompetitive restrictions by incumbent operators who have been overcharging private operators using their networks.

[regulator] said at a press briefing that the authority will within six months start regulating interconnection rates, now that it has the power to do so. [regulator] now has powers to severely punish service providers whose interconnection rates have not been approved by the authority.

Five telecommunication companies have decided to launch legal proceedings against the [x] government as protest against the higher rates applied by [incumbent] to new companies joining its network. The interconnection rates are now about twice as much as those in other industrial countries.

The higher rates were decided on "without any genuine debate and with a lack transparency" and they are expected to "result in a heavier bill for customers", the five stressed in a joint press release. The five companies are asking for the new rates to be scrapped as they are said to breach antitrust laws. This is mainly because they include fixed costs not related to the level of traffic.

The [x] government's light-handed telecommunications regulatory policy is coming under increasing pressure as the result of the long-running interconnection dispute between [incumbent] and [new entrant].

A growing number of experts argue that the case demonstrates the problems caused by the government's reliance on the courts to settle this form of dispute in the absence of any official regulator.

There is increasing criticism of the government for having allowed the dispute to drag on so long. According to [consultant], [x] has turned into a classic case study of how not to settle interconnection issues.