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MARKET INTELLIGENCE REPORT ON


INTERNET SERVICE PROVIDER (ISP) INDUSTRY IN INDONESIA
November  2008

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ISP main players

ISP business in  Indonesia still is dominated by big players manly those having wide networks. Some of the main players are Telkom, Indosat Mega Media (IM2), Excelcomindo and  Broadband Multimedia .

Telkom with a number of products  like Telkomnet Instant (Dial Up), Speedy (ADSL), Astinet (Dedicated), Telkom Hotspot (wireless)  and  Telkomnet Flexy (CDMA).  Is the largest ISP  with the widest network   and largest number of subscribers.

Other main players are Indosat Multi Media (IM2), with products including Indosatnet (Dial Up), Internet Instant (through  I Phone), IM2 (Pay TV), IM2 Indosatnet (dedicated), IM2 Hotspot (wireless)  and  Indosatnet Mobile (StarOne), Indosat Broadband 3,5G.


PT. Telkom

PT. Telkom is a state company (BUMN) originally holding the exclusive right to operate telecommunications in Indonesia. PT.Telkom began to enter ISP business  with the product of Telkomnet Instant.

Telkomnet Instant, is a dial-up internet connection  using cable fixed telephone networks   of  PT. Telkom with access code of  080989999. With the expansion of cellular business, PT. Telkom expanded  access  of  Telkomnet Instant through wireless fixed telephone,   Flexi.

Later PT. Telkom launched broadband service Telkom Speedy - in  2005. Telkom Speedy is connected  through cable fixed telephone  which has been modified  into Multi Media Access (MMA).

The position of  Telkom in  internet connections business is dominant  after it launched Speedy using the technology of  Asymetric Digital Subscriber Line (ADSL) as ADSL is much superior over other cable connection that is dial up system. Telkom virtually holds the monopoly in ADSL business in Indonesia.

Through Telkom Vision, PT. Telkom also sells internet connections  combined with cable TV service. Telkom Vision  service is available only in three cities - Jakarta, Surabaya,  and  Bandung. In Jakarta the service is available in a number of restaurants, hotels, apartments and office buildings.

Telkom also enters business in mobile service provided for the subscribers of Telkom Flexi (CDMA).

The potential of business in internet connections  has prompted Telkom  to plan expansion of its service  by expanding wireless service through farther hot spots. Now there are hundreds of hot spots of  Telkom .

PT. Telkom by Nov. 13, 1995  was wholly owned by the government  before it launched initial public offering (IPO)  later that year. With the  IPO , the government shares were reduced to 80%. After four block sales, the government's control of PT. Telkom was reduced further to 51.19%.

Indosat Mega Media (IM2)

When the ISP industry began to grow in 1996, PT. Indosat, a state company operating in telecommunications business established PT. Indosat Mega Media (Indosat M2) as a subsidiary to operate in ISP business.

In  December 2002, Indosat M2 held merger  with Indosatcom  ands started operating B2B e-commerce,  and established a new subsidiary PT Mediagate Indonesia.

In 2003, Indosat M2  expanded service  of internet connections by opening dial-up access with code number of 080988001 that could access from 180 cities in Indonesia.  By the end of 2006, the number of   dial-up subscribers  totaled 27,027.

In the same  year , Indosat M2 expanded  internet access through cellular network  of  GSM in cooperation with Indosat (Mentari, Matrix,  and  IM3). Currently, internet connections  via this cellular  could also be accessed  by CDMA a subscriber that is  Fren.

Indosat through internet connections , dedicated, with number of subscribers reaching 1,199 in 2006  up from 751 subscribers in previous year.

Lintasarta

When  internet began to be used publicly early 1996, Lintasarta was one of the pioneers  in providing dial-up access which was quite advanced  at that time  known as Internet Indonesia On-Line Access (IdOLA).

IdOLA could be accessed  from 11 large cities  in Indonesia including  Medan, Batam, Jakarta, Bogor, Bandung, Yogyakarta, Solo, Semarang, Surabaya, Denpasar,  and  Balikpapan.  The coverage of the service  was considered  adequate  at that time.

Before entering the ISP business, Lintasarta was a provider of telecommunications networks through frame relay, digital leased line and VSAT for the business sector especially banking, and insurance, established in 1988.

Cyberindo Aditama (CBN)

CBN  was established in 1995 having  9 Point of Presence (POP) in a number of cities -- Jakarta, Bogor, Bandung, Bali and Samarinda.  CBN has  dial-up  and  broadband services that include  cable TV, DSL, dedicated, wireless, mobile,  and satellite. CBN launched wiring service by connecting subscribers especially in a number of areas in Jakarta with its copper cable.

Biznet        

Biznet  was established in 2000. Biznet developed Metro Ethernet service a network of   fiber optic  in  Jakarta that succeeds in attracting  subscribers. The fiber optic network  of Metro Ethernet is built in prestigious areas of  Kuningan -Sudirman-Gatot Soebroto-Slipi- TB Simatupang-Pondok Indah, Jakarta. With the networks, Biznet is expected to attract many subscribers in the coming years.

In 2007, Biznet launched Fiber to the Home (FTTH) to attract subscribers  from among individuals. So far most of its subscribers  are companies.

Numbers of subscribers  and  internet users  grow fast

The number of  internet subscribers in Indonesia has increased in the past 5 years.  In 2005 the number of internet subscribers grew 38% to 1.5 million. The number shot up 67% to 2.5 million in 2006.

The sharp increase followed the launch  of broadband  service  with lower price  that boost ISP service industry in Indonesia.

In the coming several years, competition  is expected to grow  causing a cut in  the prices of  computer sets. The number of  internet subscribers, therefore, is expected to continue to scale up.  The number of internet users has increased with the growing number of telecommunications service centers offering lower tariffs.  The wider  access  drew more subscribers  in 2004-2007.

Access of mobile internet through cellular phone or Fixed Wireless Access also opened new market of internet users through hand phones.  The lower prices of hand phones with increase in accessing capacity and lower tariffs through mobile internet are expected to attract more users in the coming years.

Telkom with its TelkomNet instant dominates the service of internet access. In 2006, the number of subscribers of Telkom accessing TelkomNet Instant reached 680,000, or up 36%   from the year before.  Meanwhile accessing time  was 3.7 billion minutes  or an increase of 32%  from the year before.

In the past three years  broadband Speedy subscribers  grew fast in number  to reach 300,000 in 2007 or tripling the number of 100,000 in 2006.

The number of cable internet subscribers also grew fast after PT First Media launched   broadband internet access through its TV Cable network known as Fast Net.

ISPs race to expand capacity  to attract subscribers

ISP companies have rushed to attract subscribers in 2008, marked with growing demand for connections to the cyber world . PT Telkom (Speedy) is set to  chalk up a 500% increase in the number of subscribers and  PT Indosat Mega Media (IM2) sets a  more ambitious target with a 1,000% increase.

Speedy Telkom has a broadband capacity  for 330,000 subscribers ,  and it is to be increased to 1 million subscribers . In addition to expanding broadband capacity, Telkom is set to attract more Speedy subscribers   by planning to offer pre-paid  service  next year similar to voucher system in cellular phone.

With the support of  3.6 gigabyte (GB) bandwidth, Telkom hopes to increase the number of its subscribers  to one million  next year or a 400% surge  from 212,000 in 2007. Telkom is set to develop user minded (using voucher system)  instead of subscriber minded. Telkom plans to issue  nominal value of  voucher between Rp 50,000 and  Rp 100,000.
In a bid to reach the target, Telkom has acquired the network  service of  Asia America Gateway (AAG). Telkom is set to improve the performance of  Speedy, which contribute 8% to the income of Telkom

Meanwhile,  PT IM2 has  a target  to increase the number of its subscribers  by almost 1000%  in 2008. By the end of 2008, it hopes to chalk up 25,000 subscribers  to be increased to 200,000 subscribers  in  2009.
In order to reach the target, IM2  will widen its coverage area  from 10 large cities at present to 28 cities  including 16  provincial capitals  and 12  other large cities.
IM2  will expand network  by using the network of   Indosat. IM2  is expected to grow to become a major contributor to the income of Indosat in the future  although it is only a small contributor a present.  Currently IM2's contribution is less than 10%.

The number of subscribers of Telkom in 2006 was recorded at 893,200 including 680,000 dial-up subscribers, 120,000 cable internet subscribers   and 93,200 ADSL subscribers. The number did not include subscribers of mobile (CDMA) Telkom Flexi.

The number of   Indosat M2 subscribers was 28,443 including dial up 27,027, dedicated 1,199,  and  217 VPN subscribers. The number of  subscribers   in  2007 grew  following the operation  of mobile internet  of Indosat M2.

Smaller players like Pacific have 5,000 subscribers. The subscribers include 3,000 corporate subscribers and 2,000 individual subscribers. ...................

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ICN - November 2008

FOCUS: COULD THE INDONESIAN REAL SECTOR WEATHER THE GLOBAL FINANCIAL CRISIS?

INDUSTRY PROFILE:

INTERNET SERVICE PROVIDER (ISP) INDUSTRY

DEVELOPMENT OF PAY TV (CABLE TV) SERVICE INDUSTRY AMID TIGHT COMPETITION
  • Backgrounds
  • Technology used
  • Technology and facilities of Pay TV operators in Indonesia
  • Development of business in television broadcasting in Indonesia
  • Development of Pay TV operators
  • New Investment
  • Number of Subscribers
  • Market penetration of Pay TV
  • Profiles of Main Players
  • Astro controversial case
  • Indovision has a 51.2% share of the market of Pay TV
  • Market Value exceeds Rp1 trillion
  • Subscription fee tends to decline
  • Competition and marketing strategy
  • Government Policy
  • Conclusion and Prospects