The Indonesia Telecommunications Regulations: Privatization and Open Competition

Abstract

Privatization in the telecommunications sector is a growing international phenomenon. Unlike the United States, telephone service in the vast majority of countries has long been provided exclusively by government-owned and operated entities under monopolistic market structures. The classic problem in develop country is the limited ability of the government to provide sufficient funds to finance the development of the telecommunications sector. The initial approach of the Indonesian government to resolve this issue was by partial privatization of the shares of TELKOM and INDOSAT, which was achieved by listing the companies’ shares in the local and international stock exchanges, in 1994 and 1995 respectively. Privatization of Indonesian telecommunications state-owned companies such as TELKOM and INDOSAT is a key component of the Indonesian government’s economic policy. Indonesia as a member of WTO has a commitment in telecommunications services. Indonesia committed to terminate the exclusive rights: exclusivity expires in 2011 for local service; in 2006 for long distance service, and in 2005 for international service.