The internet sector in Indonesia is dominated by the mobile companies – the three largest ISPs are also the three largest mobile operators, and the majority of users use a mobile handset to access the internet. The broadband price war between the Big 3 (Telkomsel, Indosat and XL) that began in 2009 marked the start of Indonesia’s internet boom, and their high marketing spend continues to push the market forwards. The fixed-line ISPs simply don’t have the scale to compete in the mass market, so their focus is on businesses and wealthier residential customers.
Dramatic shift in access technologies
The past three years has seen a rapid change in the types of technologies used by Indonesians to access the internet. Until 2009, broadband internet connections were very expensive (US$50 per month and up) relative to average salaries, so the majority of internet users gained access via internet cafes (the previously ubiquitous Warung Internets, or Warnets as they are known).
In 2009 a broadband price war started between the mobile operators, built on the successful deployment of enhanced 2G technologies and also the build-out of 3G in the more lucrative cities. Within two years the monthly internet access fee had fallen below US$20. In a clear demonstration of how the mobile operators drive the internet market in Indonesia, between 2009 and 2012 mobile internet access tripled and Warnet access fell by half.
An ISP market dominated by the mobile operators
There are around 300 ISPs in Indonesia, 35 of which own network infrastructure, with the rest simply reselling capacity. The mobile operators are the largest ISPs by far, because the majority of users in Indonesia access the internet via a mobile device.
Telkomsel and Indosat are the largest ISPs, and are able to offer both mobile and fixed internet access through their group companies. XL is the third largest ISP. The other mobile operators (3, Axis, SmartFren, Esia and Ceria) are significantly smaller, since the Big 3 hold an 80% share of the mobile market.
The top 3 sell their internet connections under the following brand names:
|Telkomsel Speedy (also bundled with Telkom Flash, a fixed-line broadband service)|
|Indosat Super 3G|
Line speeds are similar between all three operators, with connection speeds generally peaking at around 3Mbps…on a good day and in a good location. And despite claims by the providers of much higher broadband speeds, most times in Indonesia you are happy if you can get a steady 512 kbps, especially if you’re in a high-density area such as Jakarta’s Golden Triangle.
Fixed ISPs focus on high-end business and residential markets
A number of fixed-line ISPs have built fibre-optic networks of varying sizes and capacities in some of the major cities. They primarily focus on business customers, plus some residential and apartment buildings, offering line speeds of up to 50 Mbps, but with correspondingly high prices. They have increasingly become niche high-end providers, and though they talk a good fight they are unable to compete with the massive customer bases and marketing budgets of the mobile operators.
The cable TV providers such as FirstMedia and Kabelvision also provide high-speed fixed internet connections, but cable TV penetration is relatively low in Indonesia (reaching about 4% of households) so they are not major players in the overall market.
So Indonesia will remain – as it always has been – a mobile-led market, with Telkomsel, Indosat and XL setting the pace for the other ISPs in terms of pricing, data allowances and benchmark line speeds.
And if they play their cards right, the Big 3 also have an opportunity to leverage their market-dominating position to provide internet services, and to develop significant revenue streams from messaging, entertainment, social media and e-commerce applications.