WARTA MASTEL

Indonesia has an internet user base of some 25 million – the fifth highest in Asia -- but broadband connectivity stands at less than two million.

The country’s limited fixed-line infrastructure (less than 10 million lines), coupled with its population of 240 million, means wireless broadband has huge potential, particularly in rural areas where 80% of the population lives.The government has realized the need for wireless broadband and recently awarded Wimax licenses in the 2.3- and 3.3-GHz band. Of the 73 telecom companies that participated in the bidding, eight winners were chosen for the 15 franchise zones. Each regional zone will have a maximum of two operators.

The eight winners are Telkom, Indosat, Internux, First Media, Jasnita, Berca, Indonesian Wimax Consortium (a consortium comprising Comtronics Systems and Adiwarta Perdania) and Wimax Indonesia.

The highest bid came from First Media (IDR121.2 billion -- $12.3 million) while Telkom’s bid was the lowest at IDR755 million ($80,835) for Papua and IDR533 million ($57,000) for Maluku. The table shows the spectrum allocation details in Indonesia.

Under the license rules, it is mandatory for Indonesian Wimax license holders to deploy 802.16d equipment. It is perhaps surprising that Indonesia chose 802.16d technology, unlike neighboring Malaysia, which allocated 2.3-GHz spectrum for mobile Wimax. One explanation could be that the government has already spent around $2 million to support 802.16d R&D in Indonesia. It would not have been perceived well had the government suddenly changed its policy in favor of 802.16e-2005. In addition, the majority of local companies supported the 802.16d standard.

Indosat M2, First Media and Telkom Indonesia have plans to deploy 802.16d Wimax in the 2.3-GHz band. Telkom will deploy 2.3-GHz network on Central Java, East Java, Papua, Maluku, North Maluku and North Sulawesi. To encourage local industry participation, the government has announced that license holders must use 30% local content for CPE and 40% for base stations.

Telkom Indonesia and other operators planning to deploy Wimax in Indonesia have already entered into the purchasing phase. Telkom is expecting to deploy its Wimax network in the first quarter.

In emerging economies like Indonesia, a network can initially be deployed for fixed/nomadic broadband, and slowly upgraded to support full mobility in line with revenue growth. This will lower the initial capex outlay. The government is planning an 802.16e mobile Wimax auction for 2011.

With mobile Wimax still a few years away from deployment in Indonesia, 3G technology has an early lead. But the 3G market is still in its infancy, three years after services were launched. Five 3G licenses were auctioned - to Telkomsel, Excelcom and Indosat in 2006, and in to Hutchinson and Natrindo in 2004.