Plans for Starlink to operate independently in the country using a business-to-consumer (B2C) model had surfaced last month following Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan and Health Minister Budi Gunadi Sadikin’s meeting with Musk in the United States. During this meeting, Budi proposed for Starlink to provide fast internet connectivity for community health centers in frontier, outermost, and remote (3T) regions, while Luhut explained that the government had chosen Starlink due to its relatively low cost of services.

Subsequently, on Sept. 18, the Communications and Information Technology Ministry met with representatives of SpaceX, Elon’s company responsible for managing Starlink, to further discuss Starlink’s future operation in Indonesia.

The ministry emphasized that there is an array of local regulatory requirements that Starlink must fulfill for it to operate independently in the country, namely owning an Indonesian legal entity. Only then will Starlink be able to apply for supporting licenses, such as an internet service provider (ISP) license, a network access point (NAP) license, and a license for operating a closed network. Additionally, Starlink would also need to adhere to regulations such as the domain name systems (DNS) content blocking regulation.

Starlink’s potential operation in Indonesia has also sparked concerns over the fate of the country’s telecommunications industry. It is feared that Starlink, with its low cost of services and direct access to consumers, could seize the industry’s existing market. More so since SpaceX claims that Starlink could offer internet speeds of up to 350 Mbps, which, according to a report from US-based internet testing and analysis company Ookla, is eight times faster than the average mobile internet download speed in Indonesia at 21 Mbps.

In particular, telecommunication company XL has voiced its concern over this matter. According to the company, Starlink’s operation in Indonesia must be on the same level playing field for business players in the telecommunication industry. The company added that it is the government’s responsibility to ensure the sustainability of this industry.

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Following these concerns, Communications and Information Technology Minister Budi Arie Setiadi gave an assurance that the presence of Starlink would create no harm to the telecommunications industry as companies in this industry can still compete with each other in a healthy and fair manner. Budi also emphasized that the government would provide the same level playing field between Starlink and other telecommunications companies, stating that no special privileges would be granted and that any company could operate in Indonesia “as long as they comply with the prevailing regulations”.

What’s more

Although Starlink is seeking to operate independently in Indonesia, it has already in fact entered Indonesia through a business-to-business (B2B) partnership with PT Telkom Indonesia subsidiary Telkom Satelit Indonesia (Telkomsat).

Dating back to June 2022, the government had granted satellite landing rights to Starlink so the company could provide a backhaul for Telkomsat to reach consumers in 3T regions. In doing so, Telkomsat also collaborates with Smartfren Business through telecommunication company PT Smartfren Telecom.

According to reports, Starlink has already established a company in Indonesia that will serve as Starlink’s operator in the country, PT Starlink Services Indonesia. Authorized in September 2022, the company’s business fields include satellite telecommunications, ISP and web portals or digital platforms with commercial purposes.

With Starlink’s business-to-consumer (B2C) model being the business model that the company has been implementing in the US, reports have mentioned that the company intends to operate its business in Indonesia similar to that of over-the-top (OTT) services that do not require the employment of local staff, despite the country requiring foreign companies to hire a percentage of local employees should they wish to operate in Indonesia.

This issue has since been up for further discussion, with Communications and Information Technology Minister Budi stating that the government is in negotiations with Starlink concerning the hiring of local staff. Budi also reiterated that any company wishing to do business in Indonesia must adhere to the country’s governing regulations.

What we’ve heard

The move by senior SpaceX executives to directly lobby the Communications and Information Ministry made the Telkom board of directors quite uneasy. This is because, during a mid-September meeting, Elon Musk's representative named Rebecca Slick Hunter openly explained SpaceX's intention to market the Starlink service directly to consumers in Indonesia.

If this desire succeeds, SpaceX could offer their satellite service to internet users in Indonesia without going through Telkom. However, since last year, Elon Musk's company has been collaborating with Telkomsat, a subsidiary of Telkom.

Through a previous agreement, Telkomsat acts as an agent for Starlink satellite internet services, selling them to the corporate market of internet service providers (ISPs). The substantial internet market in Indonesia has driven SpaceX's desire for Starlink to operate directly without intermediaries like Telkomsat.

However, SpaceX rejected all the requirements presented by the Communications and Information Ministry. These requirements ranged from the obligation to establish a legally registered Indonesian company to obtain permits for providing internet access services, as well as other permits such as those for operating a closed satellite network. Elon Musk wants Starlink to operate from the United States without needing any permits in Indonesia.

It's not just Telkom. Elon Musk's intention to sell internet services using Starlink satellites has made several internet service providers in Indonesia anxious. From a business perspective, they realize that SpaceX is not an evenly matched competitor. SpaceX's presence has the potential to harm local businesses. It's characteristic of Elon Musk not to be willing to collaborate with local partners.

According to sources, the government hopes to use SpaceX's entry into Indonesia with the Starlink service as a steppingstone to continue lobbying Elon to be participate in developing the Indonesian ecosystem for electric vehicle battery components. The government even offered Biak Island, Papua, as a launch site for SpaceX rockets to Mars.

The issue, according to one senior official from the State-Owned Enterprises (SOE) Ministry, is that Elon Musk has always wanted to go it alone, targeting the business-to-consumer (B2C) market in Indonesia.

Disclaimer

This content is provided by Tenggara Strategics in collaboration with The Jakarta Post to serve the latest comprehensive and reliable analysis on Indonesia’s political and business landscape. Access the latest edition of Tenggara Backgrounder to read the articles listed below:

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