Indonesia: Strong Government and Industry Support Required to Overcome 5G Implementation Issues

The mid-band spectrum (between the 1 – 6 GHz range) is considered an essential band due to its ability to support both high bandwidth and effective coverage. It was welcome news for Communication Service Providers (CSPs) operating in Indonesia when the Communications and Information Ministry announced in September 2022 that it intended to auction 10 Megahertz (MHz) in the 2.1 GHz Radio Frequency (RF) band (1,975 – 1,980 MHz and 2,165 – 2,170 MHz) for mobile services. As the government has designated the 2.1 GHz frequency band to be technologically neutral, CSPs are able to use this frequency band for 2G, 3G, 4G, or 5G services. Due to the current lack of spectrum availability, it is expected that the CSPs will bid aggressively to win this additional spectrum to enhance their mobile services, particularly in the area of 5G.

In the country, Telkomsel was the first CSP to launch 5G services, using the 2.3 GHz spectrum it had obtained via the auction in 2021. Indosat Ooredoo (now known as Indosat Ooredoo Hutchison after merging with Hutchison 3 Indonesia) has also launched its 5G services using its 1.8 GHz spectrum band, while XL Axiata has launched its 5G services using both its 1.8 GHz and 2.1 GHz spectrum bands.

While the recent announcement of an upcoming auction is positive news, it should be noted that only 10 MHz of the 2.1 GHz frequency band will be made available to the winning bidder, leading to continued concerns over the general lack of spectrum availability in the country. For example, the 700 MHz spectrum band is currently being used by analog TV broadcasters and will only be available for use after the Analog Switch Off (ASO) date set in November 2022. The 2.6 GHz spectrum band is also currently being used for Broadcast Satellite Service (BSS), with existing frequency licenses expiring in 2024. Additionally, the 3.5 GHz spectrum band is currently being used for Fixed Satellite Service (FSS), which provides network connectivity to rural areas. FSS represents a key driver for Indonesia’s digitalization goals, as it can overcome the challenges of providing connectivity to the country’s ~11,000 inhabited islands. There are no immediate indications on when the 3.5 GHz will be made available for 5G use. Lastly, there have also been no announced plans regarding any upcoming auctions of Millimeter Wave (mmWave) bands, which can enable 5G Enhanced Mobile Broadband (eMBB) use cases in high-capacity areas, support the use of 5G Fixed Wireless Access (FWA) to provide high data throughput speeds to homes and offices, and enable 5G applications that require high capacity and low latency (see IN-6259).

5G presents Indonesian CSPs with a significant opportunity to transform their businesses from simply being connectivity providers to being solution providers. As reported in ABI Research’s Network Technology and Market Tracker (MD-NWMT-106), the total number of 5G subscriptions in Indonesia is expected to increase from 1.2 million in 2022 to 188.9 million in 2027 (at a Compound Annual Growth Rate (CAGR) of 176%), thereby representing a sizable 5G consumer target market. Besides offering 5G connectivity, CSPs could leverage 5G’s high data throughput speeds and low latencies to offer new applications and services, such as Ultra High-Definition (UHD) live streaming, cloud-based gaming, and Augmented Reality (AR)/Virtual Reality (VR) experiences to create new revenue streams, thereby improving Average Revenue Per User (ARPU) and achieving sustainable Return on Investment (ROI) (see IN-6274).

In the enterprise space, CSPs will also be able to leverage 5G capabilities to collaborate with businesses on innovative solutions. For example, in September 2022, PT Freeport Indonesia (PTFI) partnered with Telkomsel to launch 5G smart mining technology, the first of its kind in the Southeast Asian region. This 5G Mining solution enables machinery and vehicles within underground mines to be controlled remotely, enhancing worker safety, while increasing productivity.

However, to unlock the full benefits and opportunities that 5G can provide, ABI Research believes that strong government efforts, with support from the private industry, will be key to driving adoption of the technology. For example, in February 2022, XL Axiata, together with the Ministry of Communication and Informatics (Kominfo) and multiple satellite operators, conducted a trial to determine whether 5G services deployed on the 3.5 GHz spectrum band will cause any interference to FSS in the same area, with the results of the trial being positive. More collaborative efforts like this will definitely be an encouraging sign for 5G development in the country.

There is also a silver lining in terms of spectrum availability as the ASO deadline approaches. As a result of digital dividends due to the higher efficiency of digital broadcasting over traditional analog television broadcasting, the ASO is expected to make available 98 MHz of channel spectrum in the 700 MHz spectrum band for 5G mobile broadband services, which is a needed boost for 5G development in the country. Strong government oversight will be required to ensure that there are no delays to the planned ASO, while also ensuring that the freed spectrum resources are allocated or auctioned quickly to CSPs to aid in their 5G rollout efforts.