Despite the proliferation of internet service providers in recent years, several factors hinder the growth of electronic commerce in Indonesia. These include the lack of a clear policy in support of an open telecommunications infrastructure, a de-facto cartel on the submarine fiber-optic cable connection to the internet backbone (via Singapore and Malaysia), a monopoly provision of fixed landline service by PT Telkom, a low level of computer ownership by both businesses and individuals, a lack of funding, and weak IPR protection. Several companies have planned new fiber optic submarine cable connections to lower the internet connectivity costs in Indonesia; however, the progress is slow due to the costs and time spent obtaining a license.
U.S. industry has identified the lack of a legal framework for ensuring security of online transactions as a particularly significant impediment. The new law on Information and Electronic Transaction (IET) has not been implemented by the government as stipulated in the law. Several Ministries are in the process of establishing a regulation to protect the sellers and the buyers of online transactions as required by the IET law, but a “cyber law” for e-commerce transactions is still under review by the Ministry of Law and Human Rights.
In the past few years, Indonesian cellular operators have been actively looking for additional content to sell. The mobile-banking feature could become the solution if the security of electronic transactions is assured. The usage of cellular handsets as a terminal for online transaction will be further advanced by the availability of 3G service.
The GOI policy to extend rural telephony and basic internet access to 30,000 villages has not yielded significant market opportunities. The Universal Service Obligation (USO) plan has caused some public tenders to be presented. Unfortunately the terms, conditions and implementation of the tenders have discouraged many potential bidders. Both the WiMax tender and Broadband Wireless Access (BWA) program have been rescheduled several times. To date potential bidders lament that frequency mapping, BWA technology specifications, local content requirements and local manufacturing requirements pose challenges that dissuade the best bidders and solutions from coming forward.