As of late 2016 Indonesia had overall internet penetration of 51.8%, according to data from the Indonesian Internet Service Provider Association (APJII). This rate is up substantially from as recently as 2013, when the penetration rate was estimated at well under 30%. The rapid jump in usage is the result of an increase in smartphone ownership in recent years, rising awareness of the benefits of ICT among the populace and an influx of investment in new communications technologies by leading telecoms firms over the past decade. “Indonesia’s [ICT] spending is always driven by consumers rather than enterprise,” Mevira Munindra, the consulting research manager at the Indonesian office of the US-based International Data Corporation, told regional media in early 2017. “The split is always about 57% to 58% for consumer IT spending against 42% to 43% for enterprise, simply because the consumer market is big, and people are buying more devices.”
EXPANDING COVERAGE: Many local ICT-related players foresee challenging times ahead in terms of continuing the quick pace of growth in internet users across Indonesia. The hurdles to expansion are numerous. For starters, geography poses a real challenge. Indonesia is made up of approximately 17,000 individual islands, many of them small and only sparsely inhabited. Ensuring reliable internet access to rural users means rolling out ICT infrastructure across this vast region, which is an expensive, time-consuming and labour-intensive process. The current data reflects this issue.
The majority of Indonesia’s extant internet users live on one of the nation’s largest islands and key population centres. Java, which is home to some 57% of Indonesia’s total population – not to mention the most populous island in the world – is also home to 65% of the nation’s internet users, according to APJII statistics. Sumatra, which is home to around 50m people, or around 19% of Indonesia’s overall population, accounts for 16% of the nation’s internet users. The disparity between Sumatra and the figure in Java – where the latter boasts a higher percentage of internet users than total population and the former the opposite – is a reflection of the higher level of urbanisation in Java.
KEY AIM: Boosting internet usage in both urban and rural areas constitutes a major policy platform of the administration of President Joko Widodo. Continued improvements to the mobile telecoms networks, which provide the majority of internet access in Indonesia, is seen to be key to this effort. At the same time, under the state’s five-year Indonesia Broadband Plan (IBP), which was launched in 2014, the government is working to meet a number of ambitious targets related to the installation of fixed broadband, both in terms of geographical reach and access speed and quality.
IN FIGURES: As of mid-June 2016 Indonesia was home to 132.7m internet users, which was equal to 51.8% of the total population, according to APJII. The data confirms that a majority of Indonesia’s internet users access the web via mobile device, including smartphones and, more commonly, so-called feature phones.
Indeed, survey results show that some 63.1m people – equal to 47.6% of total internet users – access the internet via their smartphone. Meanwhile, some 67.2m people, or 50.7% of total users, sign on either via their feature phone or computer. Lastly, just 2.2m people, or 1.7% of total users, access the internet only by computer. These figures highlight the extent to which mobile broadband is the norm in terms of accessing the internet in the country. Under the ongoing IBP, the state aims to expand access to fixed-broadband services across the country.
According to APJII data, internet usage is most common among students, followed by private sector employees, and public and private sector employees in medical and health-related industries. Internet penetration among the 10-to-14-year-old demographic was recorded at 100%. While this does not mean that every young person in Indonesia uses the internet, it does signal growing internet among the country’s youth, which bodes well for future usage trends. Indeed, the large number of Indonesian youth who are technology literate is widely understood to be a reason for optimism across the sector. As recent forecasts from the Indonesian E-Commerce Association suggest, online retail may account for as much as 5% of Indonesia’s overall economic activity as soon as 2020, up from just 0.7% in 2015. Furthermore, by 2025 the nation’s digital market as a whole is expected to be worth as much as $81bn, which would constitute more than 40% of South-east Asia’s total digital market.
Indonesia’s internet users are primarily concentrated in the nation’s urban areas, and for the most part on the islands of Java and Sumatra. Outside these key locations, usage is far more limited and varied. In Sulawesi, for example, APJII data shows there are 8.4m users, or around 6.3% of the total, while in Kalimantan some 7.6m users spend time online, which was equal to 5.8% of the total. Finally, in Bali and Nusa Tenggara Barat there were 6.1m users, or 4.7%, while in Maluku and Papua together there were 3.3m users, or 2.5%.
BROADBAND PLAN: These figures are expected to increase in the coming years, driven by rising user demand, which is expected to be met in large part – and particularly in remote rural areas – by the state’s IBP. Underpinning this ambitious plan is the Palapa Ring, a major infrastructure project comprising the installation of a 13,000-km undersea cable around the country. Access to this offshore cable will be provided by 22,000 km of fibre-optic cables onshore, which are to be managed by the private sector. The Palapa Ring project is being developed on a public-private partnership basis. Planning for the project was completed in 2015-16. The Palapa Ring is organised into three components: the west, east and central sections.
In August 2016 ground was broken on the West section by a local telecoms consortium consisting of Ketrosden Triasmitra and Mora Telematika Indonesia, which together call themselves Palapa Ring Barat. With the support of an Rp875bn ($66m) loan from the state-controlled Bank Mandiri, the consortium is working to install 1980 km of fibre-optic cable connecting five cities in the Riau Islands region.
Meanwhile, the central section of the Palapa Ring project, which is being developed by Len Telekomunikasi Indonesia, has been under construction since September 2016, and involves the installation of a network linking 17 districts. This work is being funded by the state-owned or affiliated institutions, Bank Negara Indonesia, Sarana Multi Infrastruktur and Indonesia Infrastructure Finance. The Palapa Ring project is scheduled to be completed by the end of 2018.
PRIVATE SECTOR EFFORTS: In lieu of fixed broadband access, most Indonesians access the internet via mobile networks. This has put considerable pressure on Telkomsel, Indosat, Hutchison 3 and XL Axiata, the nation’s major mobile telecoms operators, to ensure high-quality network access across the country. The extent to which these firms have achieved this has been no small feat. Indonesia’s geography is particularly challenging when it comes to achieving high infrastructure penetration rates. Nonetheless, in 2014 more than 90% of the country’s population was within range of a cellular signal, according to Statistics Indonesia.
However, some 23% of the population reported only a weak or intermittent signal, and 9% reported no signal at all. In particular, residents of Kalimantan and Papua have reported low connectivity. This is in line with recent data from consulting firm McKinsey, which shows that while mobile data in Indonesia is relatively affordable by international standards, it is of a fairly low quality. According to McKinsey, mobile data connection speeds averaged 3.9 Mbps in 2015, below countries such as Malaysia, China and Brazil, which had speeds of 5.2 Mbps, 4.8 Mbps and 4.1 Mbps, respectively.
The private sector has long led the way in telecoms infrastructure spending in Indonesia. According to a mid-2016 report published by US-based research firm International Data Corporation, in 2015 private entities accounted for approximately 92% of all ICT spending in the country, with around $6bn in total, compared with just $500m from the Indonesian government.
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