Indonesia’s Universal Service Obligation Fund

Introduction

One of the main challenges to developing ICT Infrastructure in Indonesia is its geography. This includes the number of islands, size of the territory to cover, the numerous remote and difficult to reach areas, and the number of low-income and uneducated inhabitants (GSMA 2013: 151).

Owing to the limited funding capability of both the government and the private sector, infrastructure development cannot fully meet the demand in Indonesia. Thus, isolated and impoverished parts of the country are the most harmed (GSMA 2013: 151).

Structure

According to Telecommunications Law No. 36 of 1999, “every telecommunications network operator and/or telecommunications service operator is obliged to provide a contribution to universal services.” This contribution can consist of telecommunications facilities and infrastructure and/or other compensation. In 2000, Government Regulation No. 52 created the Universal Service Obligation Fund (USOF) in order to provide access to telecommunications services. The BTIP, the Indonesian Telecommunications Regulatory Agency, a non-profit public service institution, has been established to manage the USOF. The Directorate General of Posts and Telecommunications is the regulatory agency. The USOF has an annual budget in excess of USD 170 million (Broadband Commission 2019: 56).

In 2007, services covered by universal service obligations (USO) were expanded to include information technology and broadband service (GSMA 2013: 151). Services authorized include the provision of telecommunications and information technology services, public phone service 24 hours a day, independent technology, local content priority, Internet, and broadband (ITU 2013: 79).

All providers were required to pay 0.75 per cent of their gross revenues to the fund and, in 2009, Government Regulation No. 7 increased the percentage to 1.25 per cent of all gross revenues. The USO operators are chosen by BTIP through auction processes and are licensed by the government. The BTIP can choose any telecommunications technology based on demand, target, and characteristics of the area (GSMA 2013: 152). Subsidies go to villages through the operator to provide access and services.

Projects

BAKTI manages four programs, which are funded by the USOF:

• The infrastructure development programmes being run by the government include the Palapa Ring development project, which is a National Strategic Project run by BAKTI for the development of a national fibre optic backbone network that connects all cities/districts in Indonesia with fibre optic networks. Palapa Ring is a public-private partnership (PPP) scheme that consists of three packages: West, Central, and East. At a cost of USD 1.5 billion, the program aims to provide more than 500 regencies across the country with 4G Internet access, featuring more than 21 747 miles of submarine and 13 000 miles of land cables. The project covers a total of 90 districts/cities, consisting of 57 districts/cities of services and 33 districts/cities for interconnection. It connects 11 provinces with a network length of about 12 thousand kilometres. Through the Palapa Ring, the government can facilitate speeds of up to 100 GB per second in even the most outlying regions of the country. The non-PPP scheme of Palapa Ring Project is carried out by PT Telkom, connecting 457 districts/cities. The Availability Payment scheme has been implemented for payments. By January 2020, Indonesia had completed this project.
• BAKTI has also built base transceiver stations (BTS) in Indonesia. As of July 2019, 1 068 BTS had been built across 24 provinces and 137 districts, particularly in rural areas where networks had not been established by private mobile operators.
• The third programme consists of Satelit Republik Indonesia (SATRIA), which is a satellite system prepared for fast Internet connectivity service throughout Indonesia. The plan, which has been implemented by a PPP scheme, started at the end of 2019 and it is expected to be launched by the end of 2022.
• Finally, BAKTI is providing public Internet access services, which are focused on specific public locations such as schools, vocational training centres, community health centres, tourist locations, village halls, and government offices located in rural areas and areas that still need telecommunications and information facilities and infrastructure.

Best practices

Some aspects of the Indonesia’s USOF are aligned with success factors:

• Capacity building, sustainability, and complementary services: Development of local content is classified as one of the fund’s priorities (ITU 2013: 13).
• Flexibility in service deployment: Structure and design of the USOF were sufficiently flexible to permit the subsequent addition of new technologies as a universal service category (e.g. addition of broadband) (GSMA 2013: 263).

References

BAKTI. 2019. Approaches to ASEAN Next Generation Universal Service Obligation (USO2.0) Consultative Workshop. Indonesia. https://www.baktikominfo.id/en/informasi/siaran-pers/approaches_to_asean_next_generation_universal_service_obligation_uso20_consultative_workshop-874.

Broadband Commission for Sustainable Development. 2019. The State of Broadband: Broadband as a Foundation for Sustainable Development. Geneva: International Telecommunication Union and United Nations Educational, Scientific and Cultural Organization. https://www.itu.int/dms_pub/itu-s/opb/pol/S-POL-BROADBAND.20-2019-PDF-E.pdf.

GSMA. 2013. Universal Service Fund Study. London. https://www.gsma.com/publicpolicy/wp-content/uploads/2016/09/GSMA2013_Report_SurveyOfUniversalServiceFunds.pdf.

ITU (International Telecommunication Union). 2013. Universal Service Fund and Digital Inclusion for All Study. Geneva: International Telecommunication Union. https://www.itu.int/en/ITU-D/Conferences/GSR/Documents/ITU%20USF%20Final%20Report.pdf.