Sustainability of Indonesian telecommunication operators in the era of net neutrality

Abstract

Changes in the sources of telecommunication operators' revenue due to the shifting of SMS and phone traffic to OTT applications encourage telecommunication operators to maintain their business by creating the tariff scenarios and service techniques that are appropriate with those changes. For example, one of the easiest strategies is to apply the techniques and an interconnection tariff to the OTT providers, contrarily, the existence of Net Neutrality causes the company cannot develop this strategy since the operator should serve all traffic without a discrimination. Thus, the concept of Net Quality is an appropriate strategy to compensate the decreasing in revenue from the telephone, not by raising the Internet rate, but by getting the revenue from the customers who want a better service quality of a particular OTT, to pay at a cost that is relatively more expensive than the Internet tariff run with the best-effort concept. Therefore, cost and technical calculation formula can determine the optimization of Net Quality so that operators can apply the concept to continue to maintain its business. The results showed that the Rate of Return on two of the four major operators in Indonesia was negative, which means that the operator suffered losses due to the Net Neutrality concept. Then, the author performs a simulation using the HOTTCM formula for business and technical principles. From the business point of view, by adding operator income from QoS customers who pay more than the best effort customers, without raising the Internet tariff for best effort customers, it can improve the business of telecommunication operators in Indonesia. From the technical point of view, the average speed increase of QoS customers is much greater than the decrease in average speed of the best effort customers.