Next Step for App-Based Services in Indonesia

Kominfo holds public hearing on draft regulation for OTT, highlighting fair practice for all

By Gilang Ardana
Tuesday, August 15, 2017

After it stalled for a year, the Ministry of Communication and Informatics (Kominfo) is now continuing the discussion on the draft of the Over-the-Top services (OTT) regulation. The ministry sees the move as an effort at “leveling the playing field” under the catch-all term for app-based services.

The current environment is deemed by some to be unfair for related parties, especially for telecommunications providers. The debate in Indonesia highlights the global attempt by governments to cope with the explosion of services offered on apps in areas that were once the sole province of more traditional telecom companies – and in some cases, like the range of GoJek offerings here – represent an entirely new industry.

On August 7, Kominfo held a public discussion on the draft attended by various associations, chambers of commerce and related government agencies. Kominfo’s Director General of Post and Informatics, Ahmad Ramli, opened the hearing, which was followed by a discussion featuring speakers from Kominfo’s Directorate of Telecommunications, the Directorate General of Tax at the Ministry of Finance and representatives from the Indonesia Telecommunication Providers Association.

The draft

In the latest draft circulated by Kominfo, OTT service providers are no longer required to acquire a license or permit to operate. However, they need to register with Kominfo if they conduct at least one of the followings activities: sales and marketing, advertising, collecting customer data or doing electronic transactions.

Foreign OTT providers can operate in Indonesia provided that they are in the form specified in the draft, which is to have a designated space which is owned, rented or controlled by them or have permanent availability of employees in Indonesia that can act on their behalf. This is in line with the Permanent Establishment (BUT) form explained in a Circular Letter of the Directorate General for Tax for OTT. It should be noted that foreign OTT providers can only form a partnership with telecommunications providers if they are already in those forms.

Foreign OTT providers are also obliged to comply with several other requirements: abide by various laws cited in the regulation; do content filtering; use the national payment gateway; provide access on lawful interception and provide a contact center. Bandwidth management sanctions will be given for noncompliance. There will be also a national forum created for OTT which consists of representatives from government and the people (practitioners, academics and/or associations) and has functions including performing monitoring and recommending sanctions for noncompliance. 

Leveling the playing field

The key issues – leveling the playing field, fair practices and consumer protection – were central in the rationale in the making of the regulation, as explained in the discussion.

“[The regulation] is to protect our people and to enforce state sovereignty over OTT,” said Ramli in his opening remarks.

“We have seen that revenue generated by some OTTs is bigger [in comparison to telecommunications providers] but our policies now are more weighted to telecommunications providers.”

The Director of Telecommunication, Benyamin Sura, shared the same concerns in his presentation.

“Despite the fact that OTT has been widely used by Indonesian people, there is no single regulation yet about it, no consumer protection,” he said. “We are also experiencing revenue loss from tax, especially from OTT’s digital ads.”

Benyamin highlighted how some telecommunications providers have complained to Kominfo that the existence of communications-related OTT services has indirectly reduced their revenue.

Representing Indonesia’s Telecommunication Provider Associations, Yessie Yosetya echoed Benyamin’s concerns.

“The principle should be ‘same services, same rules’,” he said. “We’ve seen some OTT providing services that are the same as what we offer, but they are not mandated to comply with the regulations.

“Such practices have decreased our revenue drastically and OTT is also not mandated to cooperate with telecommunications providers.”

In the discussion sessions, several issues were raised by participants, some related to the scope of the regulation and the synchronization of the draft to the existing regulations.

“We’re concerned about the scope of OTT defined in this regulation, in other countries there is no regulation on OTT, instead they are focusing on their ‘act’, for instance regulation on content developers, regulation on telecommunication providers etc,” said a representative from the Indonesia Telematics Society (MASTEL).

“We believe also that the definition or the focus should be for application providers only. If we focus on content providers, it is too broad.”

On the definition and scope of regulation, other suggestions raised included to create clear classifications for all OTT players and to narrow the OTT definition to exclude websites/apps that collect limited user registrations but provide free beneficial services for the public. There was also the suggestion to exclude OTT players that are not visibly making a profit from their services.

A representative from the Indonesia E-Commerce Association (IDEA) highlighted that there is a need to synchronize the regulation with the other regulations.

“We think some of the points here have already been stated in other regulations, for instance on safe harbor,” he said.

On the tax issue, Director Hasyim from Kominfo suggested that the Tax Office revise its regulation to impose taxation on local individual purchasers rather than chasing taxing the OTT.

At the end of the event, Kominfo said that all input gathered would be further discussed by the ministry. There will be a submission for a public period of consultation on the final draft on Kominfo’s website.

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