Indonesia on the verge of becoming a digital economy giant in SEA

  • Potential to increase mobile internet subscribers from 102 million in 2017 to 185 million by 2025
  • Spectrum is essential to expanding coverage and improving education and healthcare services

 

Indonesia on the verge of becoming a digital economy giant in SEA

 

INDONESIA is poised to become a digital powerhouse in Southeast Asia. However, this can only be fully realised if the country provides mobile operators access to vital spectrum bands, according to a new report, ‘Accelerating Indonesia’s digital economy: Assigning the 700 MHz band to mobile broadband’, released by the GSMA.

The study estimates that assigning 700 MHz to mobile broadband would deliver economic benefits of US$11 billion (IDR161 trillion) to the Indonesian economy over the period 2020–2030, equivalent to an incremental 1% of GDP.

The mobile sector in Indonesia has experienced rapid growth since the start of the century. Mobile broadband and smartphone adoption are rising, along with an expanding middle class and a tech-savvy youth population.

At the same time, a lack of internet access remains a key barrier for citizens’ full participation in the country’s digital society, especially for those living in rural areas.

This could change with the timely release of 700 MHz spectrum for mobile use. According to the report, authored by GSMA Intelligence, there is potential to increase mobile internet subscribers from 102 million in 2017 (39% penetration) to 185 million (65% penetration) by 2025.

“Indonesia’s digital economy is demonstrating its world-leading capability, attracting billions in investments for digital ventures,” said Rudiantara, Minister of Communication and Informatics of the Republic of Indonesia.

“It is critical that Indonesia is at the forefront of spectrum policy and allocation to ensure the digital economy continues to grow and achieve its potential for financial inclusion, economic contribution, digital citizenship and social equality.

“The 700 MHz band creates an opportunity for all Indonesians to enjoy high-speed connectivity in the most remote areas, helping to accelerate the participation in our nation’s prosperity and economic growth.”

“Indonesia is on the verge of becoming a digital economy giant in Southeast Asia,” said Julian Gorman, head of Asia Pacific, GSMA.

“By putting policy measures in place to encourage investments in mobile development and digitisation, Indonesia can potentially leapfrog other markets in terms of economic growth. In the next decade, the socio-economic benefits that mobile can deliver from these changes will have a direct impact on the welfare of millions.”

Benefits of assigning 700 MHz to mobile broadband

While 3G has been successful in extending basic mobile broadband to Indonesia’s unconnected, the technology cannot cope with the significant traffic growth expected over the next 10 years.

At the moment, mobile network operators are predominantly using 1800 MHz spectrum for 4G rollout.

The technical characteristics of the 700 MHz band would support better coverage with less infrastructure compared to higher bands, typically used for boosting capacity in hotspot areas.

“By assigning the 700 MHz band to mobile quickly, priced appropriately and in sufficient quantity, consumers will benefit from faster network rollouts and lower retail prices,” said Brett Tarnutzer, head of Spectrum, GSMA.

“This vital spectrum is essential to expanding coverage to Indonesia’s unconnected and improving education and healthcare services, particularly in rural areas.”

Further reform needed to support the digital economy

The report encourages Indonesia’s policymakers to consider rules to facilitate voluntary network sharing. This could enhance high-speed mobile connectivity by lowering the costs and risks in deploying infrastructure, particularly in remote or topographically challenging areas.

In addition, an appropriate tax regime is required, where operators contribute a fair, not a disproportionate, amount to government tax revenue.

With the right spectrum and investment policies, Indonesia, like India, Malaysia, Myanmar, and the Philippines, has the potential to accelerate its migration to high-speed mobile broadband. By 2025, 4G is expected to rise to around 360 million connections – almost three-quarters of total connections.

The report, ‘Accelerating Indonesia’s digital economy: Assigning the 700 MHz band to mobile broadband’, is available here in English.

 
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