Comparing the impact of decline in leased line prices in india and indonesia lessons for latin america rajat kathuria (2009)
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Telecommunications provide access and backbone services which affect efficiency and growth across a wide range of...
Telecommunications provide access and backbone services which affect efficiency and growth across a wide range of
industries. The quality and price of such key services shape overall economic performance, as they affect the capacity of
businesses to compete in foreign and domestic markets. Reflecting the rapid pace of innovation in information and
communications technologies (ICT), competitive market forces are becoming increasingly important in the provision of
telecommunication and networking services, definitely moving the sector away from the ‗‗natural monopoly‘‘ market model
(World Bank, 2002). International evidence suggests that market openness in telecommunications services and the quality of
the regulatory regime are drivers of ICT sector development (OECD, 2000). This study attempts to assess the impact of
decline of leased line prices in Indonesia. It tries to capture this impact through qualitative as well as quantitative impacts.
Since the decline in prices occurred recently,1 the period post the decline is not large enough to do a meaningful time series
analysis. However, qualitative assessment is made and the impact is compared with India, where decline in leased line prices
led to substantial benefits to user industries. Of particular significance is the trigger to the price decline in Indonesia. The
process was set in motion by a presentation of research results by LIRNEasia in Jakarta in October 2005 and culminated with
the incumbent operator PT Telkom and others reporting a 69-83 per cent reduction in leased line prices in April 20082.
Annex I provides a chronology of the sequence and section 4 in the paper draws interesting comparisons with a similar
process in India.
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