Fairness of Wimax tender prices debated

The Jakarta Post ,  Jakarta   |  Mon, 06/22/2009 11:26 AM  |  Business

Companies vying for a Wimax tenders have voiced different opinions concerning the reserve prices set by government.

State telecommunications company PT Indosat is of the opinion that the government's reserve price of between Rp 45 million (US$4300) and Rp 15.1 billion for Wimax areas, is too expensive. Its competitors, however, do not agree.

"The Wimax reserve prices are too expensive. It's a pilot project and the investment risk is quite high, president director of Indosat Johnny Swandi Sjam said last week.

He reasoned that, since Wimax is meant to provide Internet services in rural areas, the reserve prices should be lower.

However, Heru Nugroho, a spokesperson for the consortium of Internet service providers (ISPs) which is competing for the Wimax tender, considers the prices to be modest.

"I think the reserve prices are very modest. I'm afraid the modest prices will make big companies more determined to bid for all Wimax zones."

The Information and Communications Ministry is offering Wimax (Worldwide Interoperability for Microwave Access) tenders for areas across the archipelago.

Wimax is an advanced technology that provides high-throughput broadband connections over long distances at far cheaper investment costs than other technologies.

Earlier this month, the ministry announced the reserve prices for the Wimax tenders. Of the 15 Wimax zones, those in Jakarta and greater Jakarta are offered at the highest prices, while those in Maluku and Papua are the cheapest. Operating licenses for each zone will be given to two operators.

The Information and Communications Ministry considers five factors in determining the reserve prices, ministry spokesman Gatot S. Dewa Broto said.

"The ministry takes into account the local needs for the Internet, population size, level of phone ownership, purchasing power of local people and existing telecommunications regulations," he said.

Heru, from the ISP consortium, is of the opinion that the Internet familiarity factor should also be calculated in determining the prices. "It would be easier to sell Wimax services in Internet familiar areas such as Java," he said.

The ministry estimates that Wimax reserve prices would generate at least Rp 52 billion in revenue for the nation.

Under the tender scheme, the government offers permits for companies willing to provide Internet services using Wimax technology within a determined zones.

The winning companies then build the infrastructure needed for the service and profit from charging users fees for the service.

According to HowStuffWorks.com, a Wimax system consists of two parts: a tower and the receivers. Each Wimax tower is connected by radio signals and the Internet. One Wimax tower can provide coverage for a five kilometer radius, dwarfing that of a Wifi (Wireless Fidelity) service area.

A computer that has a Wimax receiver receives radio signals from a Wimax tower and uses them to access the Internet.

According to Johnny, Indosat's bid for Wimax is backed by the company's strong infrastructure. "Our company already has the telecommunication towers needed to operate Wimax networks," he said.

However, the company must add the equipment needed to generate Wimax signals, he added.

The ISP consortium, on the other hand, would have to spend more on infrastructure because of its limited facilities.

"For sure, if the consortium wins, we must build new towers," Heru said.

Under existing Wimax regulations, the winner of the tenders must spend 35 percent of their capital expenditure with local business.

A total of 50 percent of their operational expenditure must be spent within this country.

The authority also stipulates that for tower equipment, the ratio of local content should by 40 percent, while that for the receivers should be 35 percent.

Within five years, the equipment must use 50 percent local content.(mrs)

Government's reserved price in Wimax tender

Zones------------------- Reserved price (Rp million)
Northern part of Sumatra-------------1,301
Middle part of Sumatra---------------491
Southern part of Sumatra-------------426
Jakarta, Banten, Bogor and Bekasi----15,116
West Java----------------------------1,903
Middle part of Java------------------1,256
Eastern part of Java-----------------3,381
Bali and Nusa Tenggara---------------444
Papua--------------------------------96
Maluku and North Maluku--------------45
Southern part of Sulawesi------------434
Northern part of Sulawesi------------192
Western part of Kalimantan-----------577
Eastern part of Kalimantan-----------288
Riau Island--------------------------232

Source: The Ministry of Communication and Information

 

 

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