Business

Broadband market to double,
but penetration remains
low

The market value of the broadband business this year is estimated to more than double on soaring data consumption by Internet users. However, Internet penetration is likely to remain sluggish, preventing the majority of Indonesians from accessing the transformative power of the technology.

The head of operations at the International Data Corporation (IDC) Indonesia, Sudev Bangah, said recently that both the mobile and fixed broadband service market might top US$1.16 billion this year from $650 million last year,
which saw a 38.5 percent rise compared to 2011.

The increase in value may be more attributable to the higher consumption of data than from an increase in subscribers.

“The broadband subscriber base in 2012 was close to 31 million users, charting a growth close to 80 percent from the previous year,” he said. This year the subscriber base would probably hit 39.8 million users, he added.

Bangah said that the total broadband market was expected to grow at a compound annual growth rate of 55 percent until 2016, driven by the increased coverage provided by mobile operators in addition to the declining prices of mobile modems.

“The availability of affordable broadband packages, suitable for lower-income demographics, will also push broadband usage,” he said.

Despite the availability of an assortment of such services, broadband penetration will remain low, according to the Ministry of Information and Communication.

The ministry has revealed that fixed and mobile broadband penetration was at 3 percent and 10 percent respectively last year.

Consequently, Indonesia has one of the lowest Internet penetration rates in Southeast Asia — roughly at around 20 percent. Comparatively, Thailand has an Internet penetration rate of 40 percent, while Singapore is at 90 percent.

To improve broadband and Internet penetration, Indonesia’s 14-year economic master plan has incorporated broadband development within its targets. Part of the plan is to construct a fiber optic broadband backbone — the Palapa Ring — around the archipelago.

However, the completion of the infrastructure, scheduled for early this year, will not guarantee a dramatic rise in penetration. The government has estimated that fixed and mobile broadband penetration may only expand by 5 percent and 12 percent, respectively, this year.

According to the ministry, the low penetration is due to the sluggish expansion in fixed networks to serve households and offices, and also the fact that not many people can afford smartphone handsets to surf the Internet in a mobile way.

Out of the 60 million mobile phones shipped in 2012, 13 percent were smartphones. The percentage will go up by three points to 16 percent in 2013, and by 2014 smartphone shipments will reach 22 percent, according to the IDC.

PT Telekomunikasi Selular (Telkomsel) president director Alex J. Sinaga said that fees were one of the challenges in the provision of broadband although subscription rates in Indonesia are among the lowest in the region.

“Mobile broadband in Indonesia costs 8 US cents per megabyte, one of the lowest in the Southeast Asian region,” he said. The rate in Singapore is around 15 US cents, and in Malaysia, 30 US cents. Telkomsel, the country’s largest telecommunications provider, has a voice-communication subscriber base of more than 120 million. The company expects mobile broadband subscription to grow by 34.6 percent this year.

Alex expects that mobile broadband will “increasingly play a significant role”, given the expensive cost to construct fixed broadband infrastructure.

Qualcomm Indonesia country manager Ben Siagian added that the proliferation of wireless technology, such as mobile phones, would continue to spur the growth of mobile broadband.

“Indonesia has huge potential to become a leader in mobile broadband technology adoption,” said Ben.

However, he pointed out that mobile operators must prepare their networks to handle the higher traffic traversing through their broadband networks.

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